Interest rates tipped to reach 7.5 per cent as mortgage lending slows

Posted: 24 Apr 2007 11:24:41 GMT

Interest rates in Britain could rise as high as 7.5 per cent in the next two years, according to a group of nine economists which has signed an open letter criticising the Bank of England's monetary policy committee (MPC).

Interest rates in Britain could rise as high as 7.5 per cent in the next two years, according to a group of nine economists which has signed an open letter criticising the Bank of England's monetary policy committee (MPC).

The group has accused the MPC of failing to act quickly enough to curb inflation, arguing that the set of inflationary circumstances that has now developed will necessitate several more interest rate rises, the Daily Telegraph reports.

One of the signatories, former Treasury wise man Tim Congdon, told the paper: "Inflation is back and it's going to get to four per cent by the middle of the next year ...they [the Bank] need to start raising rates by half a point."

Evidence may now be emerging of a slowdown in mortgage lending as a result of rising interest rates in recent months, a trend further rises may accelerate.

British Bankers' Association figures show an increase in mortgage lending of £5.1 billion in March, less than the six-monthly average increase of £5.5 billion a month.


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