CBI: Interest rates likely to hit 5.75 per cent

19-Jun-2007

In news likely to be of interest to first time buyers the Confederation of British Industry (CBI) has said that it is likely the Bank of England (BoE) will raise interest rates to 5.75 per cent this autumn.

The CBI said that rate rise will be needed in order to bring inflation down below target by the end of 2008.

Ian McCafferty, CBI chief economic adviser, said: "Though not a foregone conclusion, a further interest rate rise now seems more likely than not this autumn and we have built this into our forecast.

"Recent oil price rises, unexpected and sharp increases in food costs, higher than expected import prices and businesses rebuilding profit margins after last year's squeeze have all added to inflationary pressures."

The move could be a good one for first time buyers if the rise in rates helps to cool the housing market and stop house prices rising as fast as they have been over the last few years.

However, the CBI said that the BoE should be able to bring interest rates down to a figure of 5.5 per cent in 2008 and this should be the upper limit. It did not see the need for the Bank to raise rates to six per cent.

To find out about the different ways of financing a first home, see our section ‘Affording Your First Home’.

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