With the Bank of England quarterly inflation report forecasting that inflation will rise above its 2 per cent target by 2007, the City is preparing itself for a possible further rise in interest rates when the MPC next meets on March 10.
Moneyfacts has certainly seen a trend of increasing interest rates for fixed rate mortgages over the last two weeks supporting the thinking that the next movement in base rate will be upwards.
The table below highlights the increases recently announced:
Lender
Fixed Rate Term
Date Increased
Old Rate
New Rate
Increase
Chelsea BS
2 years
15/2/2005
4.49%
4.79%
0.30%
NatWest
2 years
23/2/2005
4.99%
5.15%
0.16%
Cumberland
2 years
18/2/2005
4.84%
4.94%
0.10%
Northern Rock
2 years
09/2/2005
4.69%
4.89%
0.20%
Chelsea BS
5 Years
15/2/2005
5.09%
5.19%
0.10%
NatWest
5 Years
23/2/2005
5.09%
5.19%
0.10%
Cumberland
5 Years
18/2/2005
5.19%
5.29%
0.10%
Northern Rock
5 Years
09/2/2005
4.99%
5.19%
0.20%
Darren Cook, Head of Mortgages at Moneyfacts said: "The table above is only a sample of increases to these mortgage products. In total we have seen over 35 per cent of lenders increase their fixed rates during February.
If this trend continues, we could return to an expansion of the differential between variable rate and fixed rate mortgages which has narrowed measurably during the last 18 months.
Whilst these movements are quite small, a 0.2 per cent rate increase will not be welcomed by new borrowers who will have to pay an additional £17 per month on a £100,000 interest only mortgage."
