Consumers 'see no end' to rate hikes

The majority of consumers can not see the current pattern of interest rate rises coming to an end soon, according to a new report.

In a survey taken after July's quarter per cent increase in rates, 79 per cent of respondents predicted that rates will be higher in 12 months.

This is just one per cent lower than the proportion that expressed the view before the July rise, while the ratio of people who thought interest rates would be lower in a year stayed the same at five per cent.

Trevor Williams, chief economist with Lloyds TSB Corporate Markets, said: "The interest rate hike in July did little to reassure consumers there was an end in sight to the increases and they widely seem to agree with the prevailing view in financial markets that at least one more hike is on the horizon.

"This is probably a good thing in that it suggests consumers are preparing for higher mortgage payments."

Consumers' price expectations remained elevated in July, according to the Lloyds TSB study, with a balance of 77 per cent of respondents expecting prices to rise in the next year, compared to 74 per cent in June.

The report predicted a slowdown in spending over the coming months, as a result of growing consumer uncertainty about the labour market.

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