Surprise Monetary Policy Committee interest rate rise

15 January 2007
The Bank of England's monetary policy committee (MPC) surprised financial commentators yesterday by raising the interest rate by 0.25 percentage points to 5.25 per cent, sooner than many had expected.

Citizens Advice voiced concerns about the impact on the growing numbers of customers unable to meet regular mortgage payments and even threatened with repossession.

"Another rise in a short period of time...could hit some homeowners hard", warned Peter Tutton, policy officer for the charity.

"We know some people are taking on mortgages that stretch them to the absolute limit."

He called for clemency from lenders, urging them to be "sympathetic towards people who are struggling with payments".

Many homeowners who had not factored in an additional base rate rise "may struggle with an increase in mortgage repayments...soon after the Christmas period", noted Louise Cuming, head of mortgages at Moneysupermarket.com.

However, the third rate rise within six months is expected to alleviate the burden on the consumer at other points by curbing house price growth.

To read more about mortgages, click here.

track© Adfero Ltd