Is another Bank of England interest rate hike on the cards?

Following several interest rate rises from the Bank of England since August 2006, experts are now predicting another rise in Spring – one that could come as early as next month, delivering yet another blow for homeowners that are still repaying mortgages as well as for first time buyers that are attempting to get their foot on the property ladder at a time when house prices and interest rates in the UK seem to be against them.

Despite a drop in inflation last month, recent data from Reuters shows that there is likely to be another interest rate rise by the middle of the year, and probably sooner, and experts are predicting that the interest rate will soon stand at five and a half percent. In August 2006 the interest rate was four and a half percent, and this rose to four and three quarters of a percent.

A further rise took the rate to five percent, and in January 2007 yet another rise took the interest rate to five and a quarter percent.

Out of fifty economists that were interviewed as part of the research, forty one thought that by June of this year the interest rate would hit five and a half percent.

The good news is that none of the economists that were interviewed predicted that the interest rates would be pushed up any higher than five and a half percent in 2007.

With regards to the timing of a further interest rate hike – which would be the fourth one since August 2006 - Matthew Sharratt at Bank of America stated: "March and April have always been the main contenders. But the urgency of another hike seems to have faded after the inflation figures and so April is now more likely."

He added: "They're probably waiting on wages and CPI data to see there is a reasonable case for hiking again."

Tom Smith
23.02.07