UK Property Market Forecast and Archived Interest Rate Forecasts and Predictions at 6 7 2007

UK Interest Rates Forecasts and Predictions for Home and Property in the UK at 6 7 2007

UK Interest Rate: 5.75%

UK Interest Rates Forecast: One more rise to 6% possible later this year

Rates Hit 5.75% - Highest Level For 6 Years

The Bank of England's Monetary Policy Committee has raised the base "repo" interest rate by a further 0.25%. This is the fifth rise since last August and takes the rate to a six-year high of 5.75%.

Householders on variable rate mortgages will feel the pain - with this rate rise being equivalent to a further £16 a month for someone with a £100,000 repayment mortgage. Borrowers with mortgages whose fixed-rate periods are just about to end may find it even harder. Many of them will find rates more than 1% higher than their current fixed rates, resulting in a large, sudden hike in monthly payments.

"Pricing Pressure Still Elevated"

The latest rate rise comes as the MPC continue to try and bring inflation under control and back towards its 2% target. In their statement announcing the rise in interest rates, they commented that "most indicators of pricing pressure remain elevated."

CPI inflation, the measure used by the Bank, is currently running at 2.5% - down from 2.8% earlier in the year but still substantially higher than its 2% target. However, most analysts believe that falling energy prices, now beginning to filter through to consumers, should help CPI fall to around 2% by the end of 2007.

If this is the case, then there is a possibility that interest rates will fall again in the first half of 2008 - a scenario Chris Iggo, a senior strategist and Axa Investment Management, believes is likely.

"However, the news on inflation is likely to improve further in the near term and activity data could soften. If rates move to 6% we don’t think they will stay at that level for long. Lower interest rates are likely in the first half of 2008."

6 Per Cent Still Possible

In a recent poll of bank analysts by Thompson Financial, around half of those questioned said they believed interest rates would hit 6% by the end of 2007.

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