Interest Rates Will Surge to 6.5% by 2015, Barclays Says

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INTEREST rates will soar over the next five years despite feeble economic growth and rising unemployment, leading economists warned today.

A report by Barclays said rates will rise to 3.5% by the time of the London Olympics in 2012 and to 6.5% in 2015 to keep inflation under control.

The dramatic rise in borrowing costs -- 12 times higher than the present level of 0.5% -- will add hundreds of pounds to monthly mortgage bills.

It could be financially devastating for thousands of housebuyers entering the market now in the hope that rates will stay low for years.

Interest rates have not been at 6% since January 2001.

The report, by Michael Dicks at Barclays Wealth and Simon Hayes and Barclays Capital, painted a bleak picture of the UK despite the recession finally drawing to a close at the end of last year.

Hayes said: "The prospects for a strong recovery look to be rather poor. More likely, we suspect, the UK will manage to achieve a fairly feeble pick-up in activity, continuing to underperform most other advanced countries."

Barclays warned that unemployment will start rising again from the current level of 7.8% or nearly 2.5 million.

It forecast the jobless rate to hit 8. …


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