| UK
Interest Rate: 5.25%
UK
Interest Rates Forecast: Possible further rise to 5.50%
later in year
Bank
of England Raises Interest Rates To 5.25%
In
a surprise move, the Bank of England's Monetary Policy
Committee has increased the Bank's base interest
rate from 5.00 per cent to 5.25 per cent –
the highest rate for five years. The increase
was widely expected to take place in February, following
publication of the Bank's quarterly inflation report,
with no change forecast in January.
The
Bank of England cited continued high inflation
as the main driver for the increase, with the CPI measure
of inflation (which excludes house prices)
running at 2.7 per cent - significantly above its target
of 2 per cent.
Some
analysts also believe that the earlier-than-expected
raise was aimed at suppressing wage
inflation – the majority of wage settlements are
made in January, and with wage inflation running at
3.8 per cent (Oct 2006), the Bank is keen to discourage
any further increases in wage growth.
Another
Interest Rate Rise – What Will It Cost You?
Inevitably,
home owners with variable rate mortgages will be holding
their breath to see what impact the latest increase
in rates will have on their monthly payments.
The
Halifax has published figures showing that payments
on a £100,000 mortgage will increase by about
£16 for every 0.25 per cent increase in interest
rates.
The
three interest rate hikes since last August now total
0.75 per cent – meaning that someone with a £100,000
mortgage may now be paying an extra £50 or so
a month – a significant amount.
How
Far Will Interest Rates Rise?
Although
many industry experts believed that the base rate might
peak at 5.25 per cent this year, yesterday's increase
has caused some to revise their views, with suggestions
that a further rate rise could be in the pipeline for
the first half of the year, taking rates to 5.50 per
cent.
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