Experts predict further interest rate rise in May

Earlier this week the Bank of England announced that the base interest rate in the UK would remain unchanged at 5.25%, despite many experts thinking that there would be an interest rate rise of a further 0.25% to 5.5%.

However, although the Bank of England has now confirmed that interest rate rises are to remain static for the moment, experts are now predicting that there will be a further quarter percent rise in May, which will take the interest rate to 5.5%.

The bank has not yet provided information on how the voting panned out amongst its monetary policy committee of nine members, but many think that the vote to keep rates the same was a tight one and that this is why the interest rates will probably be hiked up again next month, when its May meeting takes place. Another interest rate could mean another blow for mortgage payers on a variable interest rate, and for first time buyers looking to get on to the property ladder, as it will mean higher interest rates and therefore higher repayments.

One economist at the Royal Bank of Scotland stated: 'We're odds on for a hike next month. A move to 5.5% in May is the most likely outcome.'

A spokesperson from Global Insight added: 'The decision for unchanged interest rates may well have followed a very tight vote. We strongly suspect that this will mark only a temporary reprieve. We believe it is pretty short odds that the Bank of England will lift interest rates to 5.5% in May as precautionary measure aimed at containing medium-term inflation risks.'

Businesses were also concerned about further rises in interest rates, and one economist said that the bank had made a wide decision not to raise rates over the Easter period, when retailers were looking forward to a boost in retail sales.

Tom Smith
22nd April 2007

 

More Information:

• Why Does The Interest Rate Of Your Mortgage Change?
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