Rates likely to rise again

MOST City economists feel that the Chancellor and Eddie George, the Governor of the Bank of England, will agree to lift interest rates when they meet on Friday. The consensus is for another half-point rise, the fourth since September, to take the base rate to 7.25 per cent.

Pressure for an early increase in interest rates intensified last week with the publication of new figures showing that economic growth was much stronger in the first three months of the year than had been forecast.

The impact of a further rise will be felt more than the last one in February, because at that time the mortgage lenders did not pass on the rate increase to borrowers.

However, the Council of Mortgage Lenders warns that this in itself will make it more difficult to hold the line again.

Whether mortgage rates would rise by a full 0.5 per cent is less certain. Gary Marsh, head of group corporate affairs at the Halifax Building Society, said that "even if there is a rise, it would be less than the increase in base rates".

The timing of any rate rise is not clear. It could be announced on Friday or could be left for the Governor to announce the following week.

"It doesn't look good either way," suggests Roger Bootle, chief economist for HSBC Greenwell.

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