Despite the fact that the Bank of England’s Monetary Policy Committee has been cautious when it comes to raising the bank rate their hand may soon be pushed to make a change due to the rising cost of oil. On Thursday the price of oil hit a 28 month high and with the unrest continuing in Egypt the price level is likely to climb according to investors. While Egypt is not a key exporter, it is the location of the Suez Canal and Sumed pipeline which is a key transport route for oil from the Middle East to reach European markets.

Should the cost of oil continue to be an issue then the cost of consumer goods will increase. Raw goods and manufacturing costs will continue to increase as well as the transport of finished goods and food. An increase in commodity prices will make a rate change necessary according to Deputy Governor Charles Bean.

How much of an increase will occur will then be the question that will need to be answered. Homeowners wanting a remortgage that have waited to react before finding a deal have probably been betting on the recent comments that a rate hike would not be substantial. In the February MPC meeting the two members that voted for an increase sought an increase of double to a 1.0%. Yet, Sentance has warned that the longer time passes without an increase the higher the hike will need to be once it happens.

While the recent focus has been for homeowners to watch house prices and inflation to best determine when to make a move before the rate increases, it has shifted that eyes should be on the price of oil now. Many economists have written published papers blaming the cost of oil a few years back as the actual cause of the financial crisis versus the housing market. Next week marks the monthly meeting of the MPC and until then there are deals still to be found in remortgage deals while the rate remains at its historically low 0.5%.