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The UK interest rate is now at 5.5%, following the latest rise of 0.25%. This is the highest rate since 2001. The decision by the Monetary Policy Committee at the Bank of England had been predicted by many experts, as the bank has to keep inflation and consumer spending under control.
Although savers welcome higher interest rates, many homeowners will now face higher repayments on their mortgage. On average the increase means an additional £16 on a £100,000 mortgage. Business groups and employers accept the need for the recent increase, but urge caution on future decisions so that economic growth in the UK does not slow down too much.
Opinions differ as to what will happen to rates over the next few months. Some analysts think a further rise to 5.75% is likely, while others predict that the latest increase will be enough for the moment. Reductions in gas and electricity prices are starting to take affect, so inflation is expected to drop back towards the 2% government target. If this happens then it will give the Bank time to wait and see before taking any decision on future rate increases.
The rate rise comes as the latest survey by the Halifax bank suggests that house price inflation is slowing down. House prices increased by 1.1% in April, taking the annual inflation rate to 10.9%. This compares to 11.1% in March.
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