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Assetsure news 18th April 2007 New Threat to Interest Rates - Interest rates in the United Kingdom look certain to rise again after consumer price inflation rose to 3.1% in March. So confident that a rate rise is imminent, helped push sterling through the $2.00 barrier for the first time since 1992.  the rise expected to be 0.5% should be announced shortly and there is a possibility of a further rise in in the  autumn. The government has set an inflationary target of 2% and as this new figure pushes the rate above the 1% tolerance mark, the Bank of England have been forced to write to the chancellor and explain the position.  This is the first time in 10  years that the bank have had to write such a letter and they are blaming this latest rise on sharp increases in food, electricity and gas prices. The office for National Statistics said that  the retail prices index which is often regarded as a better barometer of living standards rose to 4.8% in March, it's highest since 1991   The true rate of Inflation - Including the cost of purchasing homes means that the true rate of inflation in the United Kingdom is running closer to 4.8%.  And although often ignored in many statistical presentations it offers a more realistic outlook on the state of the economy. The 3 successive interest rate rises may now beginning to bite on the housing market and once the spring rush and the effect of increased utility charges are factored out, inflation may settle down a little. That said, it is almost inevitable that an interest rate rise is imminent, the economy is strong and there seems to be a belief amongst manufactures now that they no longer have to rely on discounting prices to obtain sales. Shop prices are increasing with quality product prices leading the way.    Sterling breaks the $2.00 barrier - There's no doubt about it, sterling is riding high at the moment, confidence in an imminent interest rate rise pushed sterling through the $2.00 barrier for the first time since 1992 when speculators drove it up shortly before Britain pulled out of the exchange rate mechanism. The euro also rose to within a fraction of its best ever position against a weak dollar. Whilst inflation may be rising in the United Kingdom, figures released in the US last month actually showed core inflation decreasing. Inflation in the United States  has come in milder than anticipated and this  has played a key role in the weakening the dollar. Clothing and medical costs have stabilised and US interest rates would appear to be static thus forcing many speculators to shift some of their holdings to other currencies. The federal reserve in the US do not appear keen to increase interest rates at the present moment. Whilst this exchange rate may seem appealing to Holiday makers, it just serves to show that with rising inflation and strong annual house price increases, it is the UK economy that is overheating and perhaps no real reason to celebrate.    Fixed Rate Deals Increasing - in a sure sign that interest rates are set to increase, the fixed rate market has started to creep up already. If rates are increased next month as is widely anticipated, you can expect to pay an extra £22.00 per month on a £150,000. mortgage. There have been three rate increases since August 2006 and there are concerns that many persons extended themselves in the first place , hoping that interest rates would note increase  may now be begging to struggle with repayments. Low inflation and interest rates have been a feature of recent years and many younger purchasers have no experience of  mortgage interest rates at higher levels. The cost of repaying a £150,000 loan is almost £920.00 per month, a considerable amount of money to find each month.   back to top   Copyright Assetsure Limited 2007