Mortgage costs rise 20% in two years

Latest figures from the Bank of England show that mortgage costs on a typical home have risen over 20% in the past two years.

The increase means that in the past year, the average homeowner has needed to find an extra £135 per month to cover the cost of repayments.

In December, the Bank of England’s Monetary Policy Committee cut the base rate by 0.25%, to 5.5%, and the Bank is under increased pressure to reduce interest rates for a second month running.

However, according to a survey of leading economists by Reuters, 51 of the 63 economists polled believe the Bank should wait until at least February before making any further cuts.

Howard Archer, chief economist at Global Insight, the economic forecasting consultancy, says “it seems touch-and-go as to whether the bank will act as soon as Thursday”.

The decisions could be influenced by data and survey results that will become available this week, including the December retails sales monitor from the British Retail Consortium, and the latest Halifax house price index.

According to Mr Archer, “If consumer spending was muted and house prices fell markedly further in December, it would significantly bolster the case for the Bank of England to step in with an immediate further interest rate cut.”

In any event, he is expecting the base rate to be down to 4.75% by the third-quarter of 2008.

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