A breather, then mortgage rises

HOMEOWNERS are likely to enjoy a brief respite from rising interest rates when the Bank of England's Monetary Policy Committee meets this week.

There were fears that the Bank would lift the cost of borrowing for a third successive month.

But recent warnings on credit and the property market from Governor Mervyn King and his deputy Rachel Lomax seem to have convinced the City that the public will finally curb its appetite for debt.

Money markets are gambling that the cost of borrowing may rise more slowly, climbing from 4.5% to 5% by the end of the year.

King admitted last week that the committee had been surprised by the pace of increase in house prices. And Lomax said: 'We cannot and do not ignore the influence of soaring house prices on consumer spending and hence on the overall pressure of demand.'

Ross Walker, economist with Royal Bank of Scotland, said: 'We expect 5% by the end of the year and a peak of 5.25% in the first quarter of next year - but no rise until August.'