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UK interest rate predictions fall as US and Iran agree two-week ceasefire

about 11 hours ago
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City traders have cut their forecasts for UK interest rate rises this year after the US and Iran agreed a two-week ceasefire.The money markets are now fully pricing in only one rise in UK interest rates by December, which would take the Bank of England’s base rate back up to 4%.On Tuesday, two rate rises had been fully priced in as Donald Trump threatened that a “whole civilisation will die” unless Tehran complied with his demands to reopen the strait of Hormuz.Rate expectations fell as the oil price tumbled on Wednesday amid hopes that supplies from the Middle East could return towards prewar levels.Brent crude, the international benchmark, was down 13.

3% in morning trading at $94.71 a barrel, compared with $109 a barrel before news of the ceasefire proposal emerged.During March, markets had priced in as many as three UK interest rate rises in 2026.Those expectations have pushed up the cost of fixed-rate mortgages even though some economists predicted the Bank would “look through” the inflationary impact of the crisis and leave rates on hold.Before the Iran war began, the City had expected UK interest rates to be cut this year.

Chris Beauchamp, the chief market analyst at the investing and trading platform IG, said the most borrowers could hope for was that the base rate “stays on hold all year”.He said: “The ceasefire news brings some relief for UK consumers on various fronts, not least in hopes that petrol prices might come down.The chances of a rate hike by the Bank of England have been cut too, and only 32 basis points of hikes are expected for the year, down from 62 yesterday.But the heady days of January and February, when a sustained path of rate cuts was on the cards, are long gone for now, unlikely to return in the short-term.”The average two-year fixed-rate mortgage has risen from 4.

83% at the start of March to 5.90% on Wednesday, the highest since July 2024, according to the data provider Moneyfacts.Adam French, the head of consumer finance at Moneyfacts, cautioned that mortgage rates may not fall quickly.He said: “Markets have reacted to easing tensions by pushing down expectations for future interest rate rises.Because swap rates reflect these expectations, they have started to fall, too, reversing some of the sharp increases seen since the conflict began.

“It should take the immediate upward pressure off mortgage rates.However, rates are likely to remain higher for some time yet.The volatility of the conflict can quickly move markets, which may leave many lenders cautious about making any sudden moves.“The longer the ceasefire holds and markets calm, the more the mortgage market will stabilise, and rates could even begin to edge lower.But for now, it’s more likely to slow or pause increases rather than trigger any sharp falls.

”The European Central Bank is expected to raise eurozone interest rates twice this year to head off the inflationary impact of higher oil and gas prices.Last month three ECB rate rises had been fully priced in by the markets.
societySee all
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Treat jailed drug dealers like radical extremists, says prisons watchdog

Jailed criminals who are flooding prisons with drugs should be isolated like radical extremists and “assertively managed”, the England and Wales prisons watchdog has said.Charlie Taylor, HM inspector of prisons, said major dealers were living “consequence-free” in jail when they should be separated from the majority of inmates, subjected to regular searches for phones, and punished and rewarded according to their behaviour.Taylor’s demands for a radical rethink follow concerns from MPs about how to break a cycle of violence and chaos caused by the large-scale importation of drugs into “long-term high-risk” prisons, which hold England and Wales’s most dangerous inmates.In an interview with the Guardian, Taylor said: “Some serious organised crime gang members are coming into prison and their feet just don’t touch the ground.“They’re running operations and making a lot of money almost from the moment they get into the jail

about 15 hours ago
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‘People are so judgmental’: the growing cohort of over-55s facing homelessness

Richard Hewett, who was forced to sleep in his car when his relationship broke down, is one of many in the UK hit by rising costs and a lack of social housingWhen Richard Hewett’s relationship broke down, he was forced to leave his partner’s council house – but found his disability benefits didn’t stretch far enough to get him his own flat in his Essex home town. He resorted to the next best option: sleeping in his car.It wasn’t what he had expected, aged 59. At 6ft 2in, he squeezed into a Ford Focus and struggled to sleep. When he broke his ankle, he couldn’t look after it properly, contracted sepsis and had his leg amputated

about 16 hours ago
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World held hostage by reliance on fossil fuels, Christiana Figueres warns – and climate health impacts are ‘mother of all injustices’

Countries are being “held hostage” by their reliance on fossil fuels, a former UN climate chief has warned, describing the health impacts of climate change as “the mother of all injustices”.Christiana Figueres, an international climate negotiator who helped deliver the Paris agreement signed in 2016, made the comments as she was announced on Wednesday as co-chair of a Lancet Commission examining how sea-level rise is reshaping health, wellbeing and inequality.Lancet Commissions are international collaborations that analyse major global health issues and influence policy. This commission will examine legal frameworks to hold countries accountable for the health harms of sea-level rise. It will report by September 2027

about 22 hours ago
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What are the health impacts of sea-level rise, and who should pay?

In November in Solomon Islands, the former Tongan health minister Dr Saia Ma’u Piukala stood outside the main hospital in Honiara and “watched seawater lapping at its outer walls”.“The facility is now under threat, with plans under way to relocate it to higher ground – a massive and costly undertaking,” Saia, a surgeon and now the World Health Organization’s regional director for the western Pacific, tells the Guardian.“It should never have come to this.”The impact on patients and health services is just one part of a growing health burden driven by sea-level rise, including water contamination, infectious disease, food insecurity, displacement and worsening mental health.In 2024, at the inaugural UN general assembly meeting on sea-level rise, representatives of small island developing states and low-lying countries described the issue as a global crisis threatening 1 billion people worldwide, urging governments globally to act to protect their health and lives

about 22 hours ago
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Charity cleared after false claims online over migrant welcome project

A refugee charity subjected to vicious social media attacks over a migrant welcome project in schools has been cleared of wrongdoing after watchdogs found allegations it encouraged pupils to send Valentine’s Day cards to asylum seekers were misleading and false.City of Sanctuary UK came under fire last year after rumours spread online that under its schools programme, children were being “forced” to write heart-shaped welcome cards to adult migrants, including cards addressed to “my fiance”.The Tory MP Gavin Williamson made a formal complaint against City of Sanctuary last August in the wake of the online attacks, claiming the charity had acted inappropriately and breached the law by acting in a “highly politicised” manner.However, in a finding published on Tuesday, the regulator rejected Williamson’s complaint and said the charity had been the victim of a baseless misinformation campaign that resulted in its staff and trustees receiving threats.Helen Earner, the director of regulatory services at the Charity Commission, said: “In this case, concerns about the charity’s work were fuelled by online misinformation, something charities are increasingly subject to and a concern for us as regulator

1 day ago
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Judith Rapoport obituary

The child psychiatrist Judith Rapoport, who has died aged 92, is credited with bringing obsessive-compulsive disorder (OCD) to public awareness. Her book The Boy Who Couldn’t Stop Washing (1989), which was translated into more than 20 languages and written in jargon-free style for a non-medical readership, was based on her groundbreaking research into the condition.People with OCD can feel their lives are upended by the feeling that they must constantly retie shoelaces, check light switches are turned off or doors are locked. Others describe the “torture” of having to perform rituals before leaving home or having to constantly wash their hands.Until the book was published, most people with OCD were unaware that others suffered similarly, and many were so embarrassed by their behaviour that they hid it from family and friends

1 day ago
politicsSee all
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What has conflict in Iran revealed about UK’s geopolitical standing and military readiness?

about 8 hours ago
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Antonia Romeo given powerful mandate to deliver No 10’s priorities

1 day ago
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Starmer urged to limit US access to UK bases after ‘dangerous’ Trump threats

1 day ago
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UK politics: Farage says Trump’s Iranian ‘civilisation will die’ threats went ‘way too far’– as it happened

1 day ago
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Can Starmer maintain ‘defensive strikes’ stance as Trump escalates threats on Iran?

1 day ago
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Reform cold calling public in bid to find ‘paper’ candidates for local elections

1 day ago