Interest Held But Rate Rise 'Still On The Cards'

By Abbi Rouse

Last week, the Bank of England's monetary policy committee (MPC) announced that interest rates were to remain at 5.5 per cent.

As a result, consumers looking to take out secured and Home Loans - in addition to existing borrowers - are likely to find their monthly repayment costs staying consistent.

Following the decision to raise the interest by quarter of a per cent last month, the MPC has been reported to have held the base rate so as to allow the committee more time to judge the full effect of increases in May and January.

However, despite the decision, secured loan borrowers are warned that they have no time for "complacency" with future rises predicted by various industry experts.

Director general for the Council of Mortgage Lenders, Michael Coogan claimed that as millions of homeowners are to come to the end of their fixed-rate deals over the next 18 months they could see their monthly mortgage costs raising by up to 1.5 per cent.

He said: "More than two million borrowers over the next year and a half will reach the end of fixed-rate deals and will face the prospect of higher mortgage payments."

Mr Coogan went on to add that consumers coming to the end of a two year fixed-rate deal for a £114,000 mortgage could find their monthly loan costs rising by £143 a month.

Meanwhile, an investor survey conducted by Barclays indicated that 87 per cent of respondents believe interest rates are set to be raised again over the course of this year, with 45 per cent believing they will break the six per cent barrier.

Equity analyst Henk Potts claimed that businesses are "continuing to push through price rises" with July indicated as the month most likely to witness the next rise.

David Stubbs, senior economist for the Royal Institution of Chartered Surveyors, claimed that although the hold was "not unexpected", at least one further rise is still on the cards" with an increase to at least six per cent mooted by the end of 2007.

However, Warren Bright, chief executive of propertyfinder.com, claimed that as consumers are yet to feel the total impact of the two most recent base rate rises on their ability to make homeowner loan repayments, the MPC should avoid pushing interest rates up unnecessarily.

"We would warn against any further action that puts pressure on people trying to buy and sell homes," he asserted.

These sentiments were echoed by David Merifield, president of the Derbyshire and Nottinghamshire Chamber.

Mr Merifield told the Sheffield Star that the MPC was 'right' to keep the interest rate level for June at 5.5 per cent and suggested an excessive rise could result in "monetary overkill".

As a result, those looking to take out a competitively priced personal loan could be well advised to act quickly as Mervyn King, governor of the Bank of England, has indicated that interest rates could well rise in the short-term.

Speaking to the Confederation of British Industry in Wales, he warned consumers against taking out personal loans which they may be unable to afford should the base rate rise in the future.

He said: "Obvious though the point may seem, it is unwise to borrow so much that the repayments are affordable only if interest rates remain at their initial levels."

However, Mr King did have some good news for consumers - pointing out that inflation levels are set to fall - due to lower energy prices which could help Britons with attempts at making repayments on personal loans, credit cards and other forms of borrowing.

Despite this announcement, interest rates seem almost certain to increase at least once before the end of the year, so for those with financial management difficulties opting for a low-rate personal loan to consolidate their debts now could well be a wise option.

Abbi Rouse writes for All About Loans where visitors can apply for UK loans and also focuses on personal loans for UK residents. Visit Today: http://www.allaboutloans.co.uk