| 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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