Interest rates may still rise

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by Kay Murchie

The Bank of England cautioned borrowers to prepare for the bank rate to rise from its current 5.75% to 6% by the end of 2007.

Over the last 12 months, homeowners have seen the interest rate increase from 4.5% to 5.75% to try and control inflation. In addition, the cost of home loans has increased as the interest rate has risen with lenders finding the cost of borrowing money on the markets has increased sharply.

John Charcol, the mortgage broker, commented that leaving the bank rate on hold this month brought some stability to increasing mortgage costs and for those requiring the security that a fixed rate provides, trackers will provide better value over the term of a 2-year mortgage deal.

However, Global Insight, the economic and financial analysis provider, commented that a further interest rate does not look anything like the strong certainty that it did a week ago. Much will clearly depend on how inflation, growth and financial markets develop over the next few weeks.