Interest rates 'could hit six per cent'

Interest rates in the UK could rise to six per cent before the end of the year, the Bank of England has suggested.

The Bank published its quarterly inflation report yesterday (August 8th). This showed that recently "there were tentative signs of a slowing in consumer spending".

However, it also argued that current interest rate levels would not bring inflation back down to target levels within the next two years.

The report added that, despite five interest rate increases since August 2006, the outlook for inflation still remained "highly uncertain".

At a press conference, Bank of England governor Mervyn King explained: "The committee judges that there continues to be greater-than-usual uncertainty about the outlook for inflation.

"Overall, the balance of risks to inflation around the central projection two years or so ahead is, in the committee's judgment, a little on the upside."

A further interest rate increase could be good news for landlords and letting agents as it could put people off buying their own home and force them to rent instead.

When the Bank of England increased interest rates in July, Nationwide's specialist lender, UCB Home Loans, said that rising rates would help fill rental properties.

"The combination of high house prices and more expensive loans is pushing more people into the rental market, where, as tenants, their overall outgoings are generally lower than those of homeowners," Keith Astill, managing director of the lender, explained at the time.