Experts predict further rate increases
Published On 8 June 2007
An overwhelming majority of investors believe that interest rates will increase again this year, a new report indicates.Despite the Bank of England's decision to keep interest rates at 5.5 per cent earlier this week, research by Barclays Stockbrokers found that 87 per cent of people questioned thought that rates were certain to increase again this year.
Almost half (45 per cent) said they expect interest rates to breech six per cent, while the other 41 per cent thought they would stick at 5.75 per cent.
"At the start of this year, there were hopes that interest rates would peak at 5.5 per cent," said Henk Potts, an equity analyst at Barclays Stockbrokers.
"However, the threat of inflation appears to be more of a risk than was previously envisaged. As a result, there is further pressure on the Monetary Policy Committee to take rates to 5.75 per cent.
"While there are a number of base effects that will take inflation lower over the coming months, such as lower domestic gas and electricity bills, the report highlighted concerns that companies are continuing to push through price rises."
The expectation of further interest rate increases could encourage more people to opt for fixed-rate mortgages to insulate themselves against these rises.
Recent figures from the Council of Mortgage Lenders (CML) showed that 87 per cent of first-time buyers opted for a fixed-rate mortgage in February.
