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Charcol says rate rise looks remote

The rise in interest rates predicted for later this year is looking increasingly remote following the decision to freeze the base rate for another month, according to Charcol.

The IFA says last week&#39s decision by the Bank of England&#39s monetary policy committee to hold the rate at 4 per cent for another month is no surprise, given the renewed bear market and other weak economic indicators.

Senior technical manager Ray Boulger says the base rate would have to be increased by at least 1.5 per cent to slow down house price inflation. He believes a rise of 0.25 or 0.5 per cent would have no lasting effect.

Boulger says there are tentative signs that house price growth is slowing of its own accord and increasing rates would send out a negative message to the markets and could have an adverse effect on the economy.

He believes there is still good value to be found among discount and base-rate tracker mortgages and suggests if the stockmarket continues its poor performance, borrowers will take advantage of their flexible terms by using surplus cash to reduce debt.

Boulger says: “The base rate rise that most predicted for later this year is looking increasingly remote. An increase now would send the wrong message to the markets and without a strong housing market the economy would struggle further.”

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