Fear of consumer debt and house price inflation push interest rates close to 5% mark

The Bank of England has raised interest rates by 0.25% to 4.75%. The widely predicted increase is the fifth since November and is seen as an attempt by the government to slow consumer spending and take the heat out of the housing market.

The Bank of England will hope that the higher borrowing costs will deter housebuyers from taking out mortgages and slow the rate of house price growth. It is worried that an unchecked boom will lead to a property crash.

Last week housebuilder Wimpey warned the Bank of England not to make too many more interest rate rises. Chief executive Peter Johnson said that previous rate increases had already dampened price rises.

He said that while price rises for Wimpey reservations rose by 13% last year, the last few months had only seen a single figure increase.