Homebuyers face higher interest prospect

Posted: 18 Apr 2007 10:29:05 GMT

The likelihood of homeowners having to pay more on their mortgages rose yesterday, according to economists responding to news that Consumer Prices Index (CPI) inflation had reached 3.1 per cent with predictions that interest rates were sure to rise again.

The likelihood of homeowners having to pay more on their mortgages rose yesterday, according to economists responding to news that Consumer Prices Index (CPI) inflation had reached 3.1 per cent with predictions that interest rates were sure to rise again.

Bank of England governor Mervyn King was obliged to write an open letter to chancellor of the exchequer Gordon Brown under Treasury rules, as the rate was more than one per cent above the CPI target rate of two per cent.

Global Insight economist Howard Archer Told the BBC: "This is a thoroughly nasty set of data that essentially guarantees that the Bank of England will raise interest rates by a further 25 basis points to 5.5 per cent in May."

Similarly, Stewart Robertson at Morley Asset Management told Bloomberg: "This makes a May hike inevitable and risks more beyond that."

In his open letter, Mervyn King said he still believed the inflation rate would be brought back to the target figure during this calendar year.


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