First time buyers 'unlikely' to be hit by interest rate rise

08-Jan-2007

First time buyers and existing homeowners with variable rate mortgages are unlikely to be hit by a further interest rate rise, experts suggest.

According to a recent survey by Reuters, out of a study of 50 economists, only one considers it likely that interest rates will rise this Thursday, making it unlikely that first time buyers will face higher mortgage costs so soon after the Christmas period, reports the Financial Times.

However, nearly half of those surveyed believe that interest rates will increase to 5.25 per cent by the end of March and the UK's financial markets have confirmed that they are anticipating a rate rise to 5.5 per cent during the year.

"While inflation was still projected to fall back in 2007 as the effect of higher energy prices faded, the committee remained concerned that the pick-up in the near term could affect forthcoming pay increases," said the minutes of the last meeting of the Bank of England's monetary policy committee (MPC).

The pressure to increase interest rates beyond five per cent is caused by a number of factors, including above-expectation wage increases of four per cent and a consumer price inflation rate of nearly 2.7 per cent.

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