The Week in Review: Business and City By ALISON EADIE THE week's news was dominated by Chancellor Nigel Lawson's failed attempt to stave off a rise in bank base rates. The fight was finally lost on Thursday after the Bundesbank lifted its key interest rates by a full point to clamp down on West German inflation. The rise to 15 per cent -- the highest for eight years -- will inevitably force mortgage rates higher.
The Abbey National, now a bank, and the Leeds Permanent and the Halifax building societies were quick to break the bad news to already hard-pressed homeowners by stating that mortgage rates will probably have to rise by around 1.25 points to 14.75 per cent. Mr Lawson admitted that the interest rate rise was extremely " embarrassing, awkward and uncomfortable ", coming as it did on the eve of the Conservative Party Conference. However, the worst may not be over for the embattled Chancellor. He admitted that a further increase could be necessary. Shares and sterling went down as interest rates went up. The FT-SE 100 index fell to its nadir yesterday morning at 2,254.0, down 45.4 from its opening level on Monday.
Sterling, which came under intense selling pressure on continued reaction to August's dire trade figures, fell to a low against the German mark at DM3.0081 on Wednesday. It regained some bounce to end the week nudging DM3.0400. Life will get even tougher for those whom everyone loves to hate -- estate agents. The big chains admitted that house sales could dry up between now and Christmas, as vendors refuse to accept drastic price cuts. The end of the housing boom was reflected in news of more losses and branch closures among estate agents.
The Halifax estate agency revealed a $14.5m loss in the six months to the end of July. The Leeds Permanent admitted it would be indulging in some " selective pruning " of its agency branches. Someone who most certainly will not be having trouble keeping up with his mortgage repayments is Lord Hanson, chairman of the industrial conglomerate Hanson.
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