Interest Rates May or May Not Change in August MPC Meeting
This week the Monetary Policy Committee (MPC) will be coming together for their monthly meeting. It is unclear, but expected, that they will leave the base rate at 5 per cent. Due to the unexpected growth of GDP at 1.1 per cent in second quarter, the MPC could raise the interest rate to fight off growing inflation.
The Paris based Organisation for Economic Co-operation and Development in particular has said that a rise in interest rate is necessary to hold off an inflation crisis in Britain. There are economists who warn that the base rate should remain as the UK Government Budget cut is expected to keep growth low and inflation in check. The MPC will be expected to leave the base rate alone. However, at the June meeting there was a surprise call for increase by Andrew Sentance who wanted a 0.25 per cent rise. The vote failed with only Sentance seeking the rise by many members have voiced the tides are dangerously changed and they will not hesitate to raise the rate when they deem it necessary. This economic atmosphere makes it difficult for homeowners to decide when to remortgage. Should rates rise those seeking a remortgage will lose out on savings of thousands of pounds over the lifetime of a loan. Mortgage seekers will find it even more difficult to afford and obtain a loan. "The outlook for interest rates has become a lot more uncertain" said Howard Archer, chief UK and European economist at IHS Global Insight.