Experts predict hold on interest rates

Following the series of five interest rate rises of 0.25% each over the past year, many industry experts are nor predicting that the Bank of England will keep interest rates on hold for the rest of this year.

This can enable homeowners to get some much needed breathing space as they try to get their finances in order after having to cope with rocketing repayments. Since August of last year interest rates have risen from 4.5% to 5.75%, partly because the CPI inflation rate had spiralled way out of control at 3.1% compared to the government's target of 2%.

However, CPI inflation has now come within government target levels, and the majority of analysts and economists are stating that it is unlikely that interest rates will rise again this year, particularly given the turmoil that is currently hitting the financial markets. Out of the fifty two economists that were questioned forty stated that they expected interest rates to remain on hold for the remainder of the year.

Ten of the economists questioned predicted that interest rates would actually fall later this years, possibly in November, with predictions of a 0.25% cut, which would take the base rate back down to 5.5%. Ross Walker, UK economist at the Royal Bank of Scotland stated: "A Bank Rate cut is a question of when, not if."

An interest rate cut would enable consumers in the UK to try and get back on track with their finances, as the interest rate rises have had a damaging effect on those with variable rate mortgages. A cut may also encourage more first time buyers to start looking into property purchasing again, especially if property prices fall, as many experts have predicted they will.

Tom Smith
6th October 2007

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