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Mortgages less likely to fall

Date: 25 Jan 05

Mortgages are less likely to fall in the near future, following the release of new figures that point to a rise in inflation.

The Bank of England's Monetary Policy Committee (MPC) increases and decreases the base rate of borrowing in the UK in an attempt to keep price inflation as close to two per cent as possible.

With the majority of homeowners having a discounted or variable rate mortgage, any increases or decreases in base rate has a direct impact on mortgage costs.

The news that the consumer price index (CPI), a measure of inflation, unexpectedly rose to 1.6 per cent makes the MPC less likely to lower interest rates.

Interest rates have been left on hold at 4.75 per cent since August as the housing market started showing signs of a slowdown.

Economists were surprised by the news from the Office of National Statistics that inflation rose, as CPI growth was expected to fall from 1.5 per cent in November on the back of falling petrol prices.

However, the rising cost of furniture, recreation, seasonal food and energy combined to push inflation up 0.1 per cent leaving the CPI rate at its highest point since June.

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