Hopes for rate cut dashed

Homeowners and people looking to get on the housing ladder have had hopes for a cut in the base rate of interest dashed by the government's latest inflation report.

The Office for National Statistics revealed today that inflation spiked to 3.0 per cent in April - well above the Bank of England's target rate of 2.0 per cent.

That marks the seventh month in a row that inflation has exceeded desirable levels, spelling bad news for homeowners who had pinned their hopes for interest rate relief on softening inflationary pressure.

"This is another horrible surprise on the inflation front, following on from the disturbing April producer price data," the AFP news agency quoted Global Insight economist Howard Archer as saying

"Given that the monetary policy committee had the consumer price inflation data last week, it is no wonder that they kept interest rates on hold. Indeed, the chances of a June interest rate cut are rapidly diminishing."

In the absence of interest rate relief more London property owners now run the risk of defaulting on their mortgages, with the number of repossessions expected to hit 45,000 this year alone.

News posted on 14th May, 2008