Interest rate increase "disappointing" - commercial mortgages

11 January 2007

The Bank of England''s decision to raise interest rates, which may affect investors with commercial mortgages, has been described as "disappointing" by the Confederation of British Industry (CBI).

Although the bank claimed the measure was "necessary" to curb inflation, it was widely predicted that the bank would wait until February before raising the base rate of interest to 5.25 per cent.

Commenting on the decision, Ian McCafferty, chief economic advisor at the CBI, said: "It is disappointing that, with only tentative indications about the outcome of the wage round, the bank has already decided to increase interest rates."

According to Mr McCafferty, the rates rise is unlikely to "dampen" wage increases, while inflation is likely to fall back towards the bank''s target as the economy slows in 2007.

In response to the announcement, Adrian Coles, director general of the Buildings Societies Association, urges mortgage holders, such as those with commercial mortgages, to contact their lender if they expect to have "trouble" making payments.