(1888PressRelease)
May 17, 2007 - Professor Tim Congdon, a member of the Treasury Panel of Independent Forecasters - which helped chancellors with economic policy decisions before the creation of the MPC by the Labour government - from 1992 to 1997, believes that the rapidly expanding money supply is a major cause for concern.
An interest rate of 7.5 per cent might be needed to counter this, he speculated - which would cause havoc in the mortgage market and could potentially lead to a huge rise in the number of repossessions.
"Inflation is back and it's going to get to four per cent by the middle of the next year, even though I expect the [consumer price index] to fall back a little over coming months first," Professor Congdon told the Daily Telegraph.
"You can't get away with money supply growth of 12 per cent or 13 per cent like this. It's not as bad as earlier cycles, but it is nevertheless bad and it's going to end the usual way. Rates will have to go to 6 per cent to 6.5 per cent, and may have to reach 7.5 per cent."
National Homebuyers, the UK's leading quick sale property company, adds that this is a conservative view. Director Julian King says: "If you look at interest rate predictions, they seem to be rising more each month.
"At the beginning of the year we predicted that interest rates would rise to six per cent by the end of the year. Now this is universally accepted.
"If Gordon Brown has his way it would be even higher. Homeowners who are stretched beyond their means need to be aware that National Homebuyers is a genuine solution for getting out of the interest rate trap."
