Remortgage deals on the table currently by lenders may soon change if the Bank of England’s Monetary Policy Committee (MPC) chooses to keep inflation from steaming upward by increasing the current standard interest rate. The rate is currently at 0.5 per cent and has stayed steady for over two years. Some forecasters have called for a rate increase in May if the GDP showed economic growth in the first quarter of 2011 compared to the contraction experienced in the last quarter of 2010. Inflation, though it declined in March to 4.0 per cent from the 4.4 per cent rate in February, is being influenced by rising energy and food costs.

With inflation still at double the target rate of 2.0 per cent and the economy showing growth, some economists believe that it is time to raise the interest rate, if only slightly. Continued increases in inflation could mean much higher increases in the rate down the line if it does not move upward soon. Yet, there are still some economists that believe the economy is too fragile and a rate increase will hamper economic growth.

The May meeting for the MPC is this week. Should the MPC pass again for another month to leave the rate unchanged, it could be several more months before the warning nears another meeting to expect an increase, namely August according to forecasts. If the rate does change it is expected to be a slight one, due to the economy’s weak growth at this time. How lenders will respond to the increase or to an unchanged rate is expected to be seen quickly after the MPC meeting. For some an unchanged rate will mean the need to have competitive deals on a remortgage to bring homeowners in and for an increased rate it could mean lenders will make the most of the run for remortgages and raise fees and rates to be more profitable. Analysts have warned that homeowners should keep a close eye on forecasts and for the next few months that is great advice to follow.