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Summer rate hike still on the cards The Bank of England's opted to keep the bank rate at 5.5%, but economists have said that with inflationary pressures still looming thanks to high food and oil costs there is still a strong chance of a rate hike in July.
However, even if the bank rate remains on hold again next month, there could be a rise in August when the Bank of England sees more detailed inflation data. Ray Boulger, senior technical manager at mortgage broker John Charcol, said: 'The majority of economists are calling for a rise in July but if we need another increase it would be more logical for the MPC to wait until the next quarterly inflation report in August before making that decision. With the total previous rise of 1% looking like it is doing the trick, I believe the MPC will want more time to see if this is indeed the case.' A year of rapidly rising house prices, leaps in household bills and four separate 0.25% rate hikes has spelt tough times for homeowners and homebuyers. But experts say a slowdown in the property market has been in evidence in the latest wave housing statistics, with growth moderating, the lowest level of mortgages approved for homebuyers in a year and new buyer demand falling. David Stubbs, senior economist at the Royal Institution of Chartered Surveyors, said: 'The housing market slowdown is now well and truly underway. With mortgage rates continuing to rise, first time buyers are finding it increasingly difficult to afford the massive mortgages they now require to get on the ladder. 'Although the housing market will continue to slow in coming months, good economic conditions and a lack of homes for sale will continue to support prices and prevent the crash that some commentators continue to predict. However, if interest rates were to rise to 6% before the end of the year, a sharper slowdown and a difficult 2008 would be on the cards.'
Simon Lambert, This is Money
8 June 2007 |
