Lloyds TSB mortgages finds interest rates are expected to rise

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Lloyds TSB mortgages finds interest rates are expected to rise

Mon 10th Jan 2005

UK consumers think interest rates will rise further, according to Lloyds TSB.

The bank's UK Consumer Barometer found that 70 per cent of UK residents expect interest rates to continue to rise, with only 15 per cent expecting rates to remain the same. Just 11 per cent felt rates would fall.

But a majority of professional analysts, along with UK traders, predict that rates will either remain at 4.75 per cent or be cut over the coming year.

The country's largest mortgage lender, Halifax, predicted last week that interest rates would fall twice in 2005, to stand at 4.25 per cent.

"There seems to be a strong view among consumers that interest rates are still on their way up, which is at odds with the market view," Lloyds TSB Scotland's Douglas Reid said.

"This suggests that if the interest rate environment turns out to be more benign, inflation and employment expectations are likely to rebound.

"It could spark a burst of activity in the housing market and faster economic growth, as consumers increasingly realise that interest rates may have peaked at a low level."

The Lloyds TSB UK Consumer Barometer also found that growth prospects remain upbeat for 2005.

However, skills shortages are likely to grow. This in turn may lead to labour market bottlenecks, which have the potential to raise employee wage pressures.

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