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Housing bubble could affect interest rates

13 May 2014

The Confederation of British Industry (CBI) has predicted that the housing market could force the Bank of England to raise interest rates early next year.

Predictions are that UK GDP will rise from 2.6% to 3pc. In a recent statement the CBI said it is ‘bringing forward its estimated date of an interest rate rise to the first quarter of 2015, when it is forecasting the first 0.25 percentage point increase’.

Director General of the CBI, John Cridland, warned: ‘We have to remain alert to the risks posed by unsustainable house price inflation, and the Financial Policy Committee is poised to act when necessary.

‘Housing has come back under the spotlight as annual house price inflation figures have reached double digits on some measures. While housing transactions are still running almost 30% below their peak in 2006, they are picking up steadily’.

Economists have claimed that Bank of England governor Mark Carney will confirm an interest rate rise this week.

The CBI has urged that ‘businesses must be at the heart of delivering prosperity for all’, and will publish its pre-election proposals in full later in 2014.