(1888PressRelease)
June 13, 2007 - This week, the monetary policy committee (MPC) of the Bank of England held its monthly meeting to discuss the economy, inflation and of course the interest rate. In the past twelve months, four of these meetings have resulted in the interest rate going up, by a quarter of a percentage point each time. Inflation has been running at high levels and in March it was revealed that a three per cent upper limit imposed by the chancellor had been breached.
That led to the latest interest rate rise, in May of this year. Following that decision, and indeed following all similar decisions previously, there was a rush on fixed-rate mortgage products as homebuyers and investors alike sought to secure the best mortgage deals they could in anticipation of further rate rises.
This month, the MPC decided against raising the base rate any higher. However, this has not stopped the frantic activity around fixed rate products, as many economic analysts are agreed that interest rates are likely to go up still further some time this year. Trevor Williams, chief economist at Lloyds TSB Corporate Markets says: "We may well see a rate rise before the summer is out."
Barry Naisbitt, chief economist at Abbey, takes a similar view. He notes that "financial markets are clearly expecting a further rate rise, particularly after the analysis in the Bank of England's inflation report last month". In addition, he says, cautious financial markets are not yet convinced that inflation is under control, which means that "a further rise in rates in the coming months is likely".
Rising interest rates are partly to blame for the number of people that cannot afford to take their first steps onto the property ladder, according to a number of industry bodies. The newly-established National Housing and Planning Advice Unit (NHPAU) believes that this, combined with alack of supply on the market, is pushing house prices - and therefore mortgage payments - through the roof.
A recent survey revealed that 35 per cent of non-property owners think they will never be in a position to buy their own home, while a further 18 per cent think it will be at least five years before they are in a position to do so. This is good news for the buy-to-let investor, meaning increased demand from rental stock as frustrated home buyers join the numbers of students and young professionals that traditionally make up the core leasing market.
