Interest rates set to top 5%

HOMEOWNERS are being warned to prepare for steady increases in the cost of their mortgages over the coming months as the Bank of England raises the base rate to its 'natural level' at between 5% and 5.5%. The current base rate is 4%.

The warning comes from Paul Tucker, one of nine members of the Bank of England's Monetary Policy Committee - the key group of economists and decision-makers who meet once a month to set the country's interest rates.

Tucker told the Sunday Times: 'At 4% we are still stimulating the economy. If the economy travels along the path most expect, rates will edge up.'

Consumer spending is still driving the economy but fears are growing that growth is being fuelled by unsustainable levels of consumer debt.

Last month the MPC voted eight-to-one to keep rates unchanged after .25 percentage-point rises in November and February.

Many experts believe the MPC will raise rates when it meets in May.

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