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Industry divided over base rate rise

Pink’s 1000 index survey has revealed that the industry is divided over whether the Bank of England will raise interest rates in Q1 of 2007.

The survey shows that 70% believe there will be another rate rise in Q1 of 2007, while 19% do not anticipate a change.

However, 62% of respondents think the recent Bank of England base rate increases will not cause the housing market to slow down in 2007.

The survey suggests that the industry is divided in its opinion as to whether or not another rise will take place in the near future.

Industry experts have been having their say in the trade press.

Louise Cuming, head of mortgages at moneysupermarket.com, says: “In 2007 I expect interest rates will rise briefly but go no higher than 5.5%, and will fall back by the end of the year.”

Ray Boulger, senior technical director at John Charcol, says: “Governor Mervyn King’s comments in his recent appearance before the Treasury Select Committee gave no encouragement to the view that base rate would rise again any time soon.

“Factors suggest the MPC will be prepared to wait some months to see the impact of the two recent rises before seriously considering another increase.”

Neil Hoare, marketing manager at Pink, thinks that the market anticipated the recent rise some weeks in advance but there appears to be few signals that another rise is imminent.

He says: “If there is to be a change, then I would not expect to see any indication until the high street has finished its analysis of consumer spending over the Christmas.”

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