RICS expects a rise in interest rates later in the year

Milan Khatri, chief economist at the Royal Institution of Chartered Surveyors welcomes the Bank of Englands unchanged base rate decision.

Khatri says: The Bank of England’s decision to leave interest rates unchanged today at 4.5% is welcomed by RlCS, though not unexpected.

The UK economy is performing well as rising global activity is helping to propel manufacturing exports and belated business investment higher.

Consumer spending has lagged behind the rest of the economy, though even here there is growing evidence that households are losing their grip on their wallets as the job market picks up (almost 220,000 jobs were created in the year to March 2006).

The housing market has shown some signs of cooling in recent months, with mortgage approvals dropping in April and house prices reported as flat in May by lenders.

However, RICS expects the housing market to remain stable through 2006 as the economy continues to grow, providing a lift to consumer spending.

RICS expects the Bank of England to follow the lead of other world central banks, and raise interest rates later this summer or autumn.

A modest rise in borrowing costs is unlikely to derail the wider economy and households on tight budgets will need to factor higher interest rates into their calculations.