BoE raises interest rates to 5 per cent - commercial mortgages

09 November 2006

As predicted by a number of experts, the Bank of England's (BoE) monetary policy committee has chosen to raise interest rates by 0.25 per cent to five per cent.

According to the BoE, which last raised the base rate in August, the strength of the economy and business investment were factors in its decision, which could effect investors with commercial mortgages.

However, current financial pressures and the present level of CPI inflation, which stood at 2.4 per cent in September, prompted the committee to take the step to increase the cost of borrowing.

The BoE comments: "It is likely that inflation will rise further above the target in the near term, but then fall back as energy and import price inflation abate."

Welcoming the move, Milan Khatri, chief economist at the Royal Institution of Chartered Surveyors, says that it will provide a more "stable" market for property buyers, while helping to prevent "inflation pressures" from rising.

Mr Khatri argues that although higher interest rates are likely to slow the housing market, the step taken by the BoE should result in less volatility within the economy.