British interest rates set to soar

Britain's homebuyers are facing higher mortgage repayments as economists tipped the Bank of England to raise interest rates today.

According to analysts, the bank is almost certain to hike the cost of borrowing by 0.25% to 4% when it announces its monthly rate decision.

The growing strength of the economy and sustained consumer confidence are likely to trigger the increase.

Yesterday's Purchasing Managers Index from the Chartered Institute of Purchasing and Supply was the latest in a string of surveys to reinforce an positive outlook for the British economy and consumer spending.

The study showed activity levels in the service sector during the month rising at the sharpest rate since June 1997.

Other studies showing improvements in manufacturing and consumer confidence followed results last month showing stronger than expected growth in retail sales and production.

High street sales growth reached the highest level since May 2002, while estimated gross domestic product (GDP) increased by 0.9% in the fourth quarter of 2003 against the previous three months.

In London, the stock exchange has been factoring the impact of a possible rate rise into share prices and experts have warned of the potential effect on manufacturing industry and retailers.