Interest rates could potentially be lowered as early as November, according to the Council of Mortgage Lenders (CML).
Commenting on the recent bankruptcy of US firm Lehman Brothers, the bailout of Freddie Mac and Fannie Mae and a number of events in the UK financial market, the CML speculated that rates could fall as a result.
“Forming a clear view on where events might take us next is highly challenging amid such high-octane volatility,” the organisation stated.
However, it predicted that the Bank of England may cut interest rates in coming months as a response to high inflation and unemployment. Such a move could have an effect on the cost of borrowing.
The CML claimed that the economy has recently experienced conditions that “few would have believed possible”.
Mergers have taken place between several UK mortgage lenders over the past few weeks in an attempt to stabilise conditions.
Lloyds TSB’s takeover of Halifax Bank of Scotland could help to raise consumer confidence, the Financial Services Authority has said.
By Jamie Price