Inflation 'at 11-year high'

17-Jan-2007

The UK's rate of inflation is at an 11-year high according to new research, prompting fears that first time buyers could be faced with further interest rate rises.

Official statistics suggest that higher fuel costs are partially responsible for pushing inflation to three per cent in December - a rise of 0.3 per cent from the previous month - potentially increasing the cost of funding a property purchase for first time buyers.

"The most recent inflation data has sounded alarm bells amongst central bankers that higher inflation expectations could become embedded unless a firm signal is sent to the market," said Oliver Gilmartin, an economist from the Royal Institution of Chartered Surveyors.

"January's surprise interest rate rise is likely to soften new buyer enquiries in the coming months, as was the case in mid-2004 following four successive interest rate hikes in five months," he added.

In related news, there are concerns that the recent rise in the Retail Price Increase to 4.4 per cent could increase inflation further by escalating the pressure on employers to significantly raise wages to offset any perceived falls in "living standards".

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