Business loan customers on alert after rate prediction

Fri, 09 Mar 2007

Business loan customers may be concerned to hear that their monthly repayment costs could increase later this year, if predictions made by a financing expert come true.

Yesterday, the monetary policy committee of the Bank of England opted to hold the base rate at 5.25 per cent, following on from its shock decision to raise interest rates in January 2007.

The decision means that many business loans may continue to incur the same repayment charges as last month.

Nevertheless, Stephen Leonard, director of mortgages at Alliance & Leicester, has indicated that borrowers across all financial services sectors should brace themselves for a further rate rise over the coming months.

"While this most recent MPC [monetary policy committee] decision will come as a relief to borrowers, we are not out of the woods yet and we shouldn't be surprised to see at least one further rate rise during the course of 2007," he explained.

The monetary policy committee convenes every month to decide whether to change interest rates or hold them at their present level.

Its mandate is to ensure that consumer prices index inflation remains within a percentage point of chancellor Gordon Brown's stated target of two per cent.

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