CBI Warns of Higher Interest Rates in 2011
The Confederation of British Industry (CBI) warned today that interest rates will rise next year – with consequences for people with mortgages or considering taking out unsecured personal loans in 2011.
The business organisation said that increased rates could raise mortgage repayments by up to £200 a month, and the effects on personal loans’ interest rates could also be severe. The CBI report said that interest rates are going to have to go up in the New Year in order to counter the impact of rising inflation.
Currently, the base rate, set by the Bank of England, is at an historic low of 0.5 per cent, although the rates on personal loans vary.
The CBI report said: “This will make conditions difficult for household finances, and we predict fairly slow growth in consumption over the next two years.”
Commenting on the report, the group’s chief economic adviser Ian McCafferty said: “What is striking is how little we see growth accelerating in 2012. Typically, by the third year of a recovery, growth would be more robust than we expect for either 2011 or 2012.”
“Growth prospects for consumer spending look pretty subdued over the next couple of years. Real take-home pay will be hit further next year, unemployment is not expected to fall very quickly in 2012, and households will most likely face higher mortgage interest rates.”
The likelihood of higher interest rates in 2011 has made obtaining good value unsecured personal loans at current rates of interest all the more attractive.