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UK Interest Rates Forecasts and Predictions for Home and Property in the UK at 26th January 2007

UK Interest Rate: 5.25%

UK Interest Rates Forecast: Further rise likely before June '07

Interest Rates Could Reach Six Per Cent

There is a "pretty good chance" that the Bank of England will raise the base rate again next month, according to Roger Bootle, respected economist and economic advisor to accountancy firm Deloitte.

Such a rise would leave the base rate at 5.5 per cent, raising the cost of borrowing and of mortgage payments for Britain's homeowners.

Bootle said that he would expect a delay before rates rose beyond 5.5. per cent, but would not rule out further increases. "If economic data, including inflation data, continues to come in strong, I think rates will go up again, and indeed I don't rule out rates finishing up at six per cent", he commented.

Inflation at Highest Level for 11 Years

Inflation reached an eleven-year high of 3 per cent in December, according to new official figures, with the Retail Price Index measure of inflation, which includes mortgage interest payments, reaching 4.4 per cent.

Huge rises in oil and other energy prices are thought to be behind the rise in inflation, and despite wholesale oil and gas prices having dropped, these reductions have yet to be passed onto consumers, preventing inflation from subsiding.

These figures are likely to contribute to wage inflation over the coming months, and seem likely to lead to at least one further increase in interest rates.

James Knightley, an economist at the ING Bank, commented that, "…there remains the real risk that the Bank of England will hike interest rates again". Knightley said that he would expect such a rise to take place in the next two months, a sentiment echoed by other leading analysts.

 

 

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