Tuesday 11th September 2007
Sub-prime mortgage fears in the US could lead to increased interest rates on UK mortgages in the long-term, an expert predicts.
Professor Willem Buiter, a former member of the Bank of Englands monetary policy committee (MPC), made the claims on the BBCs Today programme, the broadcaster reports.
He told the network that the issue remains an "open question" as long as the crisis in the US continues.
"The extent to which this translates into higher rates being charged to households and mortgages or hire purchase loans or higher loans to businesses in the real economy, that, I think, is an open question," he asserted on the show.
"The longer it lasts, the more likely it is that all rates from deposit rates to mortgage rates to loan rates will, ultimately, in the private sector get pulled up."
Professor Buiter added that banks in the UK are currently in a state of "fear and loathing" as they are reluctant to lend money to each other to service short-term debts.
This has led to embarrassment for some financial services providers in recent weeks, with Barclays being forced to turn to the Bank of England for a £1.6 billion overnight loan.
Barclays claimed that a technical glitch had led to a shortfall in funds at the end of the day, with no time left to borrow from another bank.
Professor Buiter voted in favour of an increase in the base rate of interest 17 times in his 36 meetings as an MPC member, compared with ten suggestions that the rate be reduced.
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