Consumers expect interest rates to rise

One in four UK consumers expect interest rates to rise over the next year.

In a January poll by Lloyds TSB, 24% of Brits predicted that interest rates will be higher in 12 months time. This is compared to 4% in Lloyd’s December poll.

Lloyds’ Consumer Barometer also found that expectations on inflation have improved.

Most consumers expect the exchange rate to hold at around 4.3%, compared to a forecast of 4.6% in December.

In addition, aggressive January discounting by retailers encouraged fewer consumers into reporting that prices increased over the last year.

Only one third (33%) of consumers felt that prices rose over the previous 12 months, the lowest figure since the survey began in 2004.

Trevor Williams, chief economist at Lloyds TSB Corporate Markets, said: “The financial markets expect the record low interest rates to remain in place for some time.

“But consumers increasingly believe the low rate environment won’t last for long and are preparing for them to rise.

“Looking ahead to higher rates is not a bad thing; consumers are less likely to struggle when rates eventually do rise again, once the economy is recovering.”

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