Interest rates increase to 5.5 per cent
Published On 10 May 2007
The Bank of England's Monetary Policy Committee (MPC) has decided to increase the official rate of interest in the UK to 5.5 per cent - a rise of 0.25 per cent.The increase was widely expected; especially after government figures published earlier this month showed that inflation breached three per cent.
Making the announcement, the MPC said that it expected lower utility costs and weak import price inflation to help the consumer price index (CPI) fall back to near two per cent by the end of the year.
However, the MPC said that underlying growth in consumer spending and rapid credit growth meant that an increase in interest rates was required.
Commenting on the increase, David Kuo, head of personal finance at Fool.co.uk, said: "For almost three out of four homeowners, today's rate hike will have no immediate impact. According to the Council of Mortgage Lenders, fixed-rate mortgages now account for 76 per cent of loans for house purchases.
"The Bank of England may have taken its eye off the ball and allowed inflation to creep up unnoticed. But homeowners don't have to pay for the Bank's error, and overpaying your mortgage is probably the best risk-free rate of return for your money."
However, Adrian Coles, the Build Societies Association's director general, said that rate rise could cause problems for "people who have also taken out personal loans or credit cards".
