- 01
- Oct
When it was announced that the Bank of England was keeping the base rate at 5.75 percent in August, many consumers were extremely relieved – especially those whose mortgage and loan repayments had already left them facing hardship. This was the last point when there was any anticipated rise on the horizon.
However, as much of a relief as this freeze on rates may seem for some, others are left wondering if this is really as high as the rate will go or will be more rate hikes in the near future? Over the past year the Bank of England has increased the base rate five times, from 4.5 percent to the current 5.75 percent rate. The latest rate hike took place in July along with many predictions that the rate will increase to six percent by the end of this year. With the housing market slowing down, and home loan payments raising many believe that the rate rise has come to an end. However, there are many who feel that the rate will increase to six percent; meaning that there will be more interest rate hikes before the end of 2007. Others feel that the base rate increase has reached their peak and that interest rates will start to go down next year.
The interest rate is set by the Monetary Policy Committee, which decides to either raise or lower the base interest rate. The reason they raise or lower the interest rates, is an attempt to keep the inflation as close to the government’s two percent target as possible. Since May 2006 the inflation has been running above the governments target, which brought on the five interest rate increases over the past year. Whether or not the Bank of England will raise the interest rates, no one will know for sure.
