Bargain house-buying 'could suffer as inflation bites'

Inflation is 'in the economy' and will soon see interest rates rise to a higher rate than at present, making it necessary to factor in a rise in repayments for people taking advantage of current lower property prices, according to Fool.co.uk.

The online financial community explained that bargains were to be had on mortgages, but advised that repayments should be calculated on the assumption that interest rates will rise as inflation comes to bear and the credit crunch eases.

Fool.co.uk has carried out research into the public's perception of inflation both this year and last, finding that general opinion considered prices to be rising faster than the official rate – a trend likely to see interest rates rise later as inflation bears its true force.

David Kuo, head of personal finance at Fool.co.uk, said: "Although at the moment we are seeing interest rates come down because the Bank of England is very worried about a recession, we do honestly believe that there is inflation within the economy.

"What you really need to do is to work out, if you manage to get a decent rate of interest today, you should add another couple of per cent onto that and see if you can afford to keep up the monthly mortgage repayments".

He added that the real rate of inflation could be best judged through people's perceptions, as a person whose monthly spend was largely food biased would be experiencing a more rapid rise in expenses than the official inflation rate suggests.

Published 18th January, 2008

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