KBC Asset Management is predicting that euro zone interest rates are set to rise by up to three points over the next two to three years. This will take the main European Central Bank rate to 5% and mortgage rates here to over 6%.
KBC's Chief Economist Eoin Fahy says the reason for the rise is the clear indication that, finally, the euro zone economy is now recovering.
'Although 2004 will not a great year for growth it will nonetheless be the strongest that we have seen since the height of the boom in the year 2000,' he states in an economic update today. 'Importantly, next year is also expected to see stronger growth,' he says.
He says that in the following year or two, as growth accelerates still more as move further and further away from the slowdown, it is likely that the level of interest rates will rise still further.
'Potential borrowers, whether homebuyers or corporates, should factor such increases in and give serious consideration to fixing their borrowing rates now,' he cautions.
