The Bank of England's decision to hold interest rates has not dampened anticipation among investors there will be another hike before the end of 2007, according to Barclays Stockbrokers.
The investment firm quizzed 743 investors and found 87% believe interest rates will rise again following last month’s 0.25% increase to 5.5%.
According to Barclays, 45% of those who anticipate an increase this year expect rates to reach 6%, whereas 41% believe interest rates will finish the year at 5.75%.
Pressure is on the Monetary Policy Committee - the Bank of England group charged with the job of setting the base rate each month - to up interest rates to quell both the relentless property boom and rising inflation, which topped three per cent earlier in the year.
Henk Potts, equity analyst at Barclays Stockbrokers, says: “The threat of inflation appears to be more of a risk that was previously envisaged.
“However, on a positive note, it does seem that wage inflation remains subdued.”
He predicted that the base rate would rise again as soon as July, but not again in 2007.
Others, however, say another rate rise could prove catastrophic for some homeowners.
Robert Bryant-Pearson, chief executive of Allied Surveyors, says: “The housing market has slowed considerably and during the remainder of the year I would expect to see a quieter market with limited supply matched by muted demand.
“There is wide speculation that rates are close to their peak in the current cycle, which is just as well: if rates were to increase much more, then repossessions would rise and we would see a price crash as we did about 16 years ago.”
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