Another interest rate rise from the Bank of England

Last week the predictions of many experts and analysts were proven correct, as the Bank of England raised interest rates for the fourth time in nine months, pushing up the rate by a further 0.25%.

The interest rate was hiked up from 4.5% to 4.75% in August last year, and then from 4.75% to 5% in November last year. A surprise interest rate rise in January of this year pushed the rate up by a further 0.25% to 5.25%, and this week the latest interest rate rise pushed up the rate to 5.5%.

The latest rate rise means that borrowing is at its highest in six years, but officials state that the rise was necessary in order to try and curb inflation. The target rate for inflation is 2%, as set by the government, but it has currently broken through the 3% barrier. Many experts state that interest rates will have to continue rising perhaps as high as 7.5% or beyond in order to try and bring inflation under control.

Although borrowers will now have to deal with larger mortgage repayments, there were some predictions that the Bank of England might raise interest rates by 0.5%, so the news is not all bad and for most came as no surprise.

Those on a variable rate mortgage will see repayments on their mortgage go up, with those with a £100,000 mortgage paying an additional £16 per month. Another interest rate rise is expected later this year, with industry professionals predicting that the interest rate will hit at least 5.75% before the year is out.

Howard Archer from Global Insight stated: 'We do not think the Bank of England's job is done yet. Unless data over the next few weeks shows a clear easing in price pressures ... we expect the MPC to raise interest rates by a further 25 basis points to 5.75% by August. Indeed, we would not rule out another 25 basis point hike as soon as June.'

Tom Smith
23rd May 2007

 

More Information:

• Choosing The Right Mortgage
  The market is flooded with different types of mortgages, but how do you know which one is right for you? The decision has to be yours, whether you take advice from an Independent Financial Advisor or do your own research.
• Don’t Forget The Extra Hidden Costs Of Getting A UK Mortgage
  For most of us, buying a new home is both one of the most exciting and stressful times of our lives. It goes without saying then that this is not a particularly good time to find out that you may be facing a bill of thousands of pounds in extra hidden costs for getting the mortgage to buy the UK property.
• Can You Rely On Your Family To Help You Buy Your First Home?
  At no time in its history has the UK housing market since such a marked increase in the average value of its housing than in the last 20 years. Today, regardless of whether you come from the North-east or South-east, more and more young Britons are having to stay at home much longer and also to look more ingenious ways to try and raise the large deposits they’ll need in order to help them purchase that first home. The big question is, can you rely on your family to help you buy your first home?