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Business leaders predict interest rates rise early in 2015

Business leaders have delivered a warning about overheating in the housing market, saying interest rates will need to rise early next year. Interest rates will rise from 0.5% to 0.75% early next year, according to CBI predictions.

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CBI predicts early rate rise amid house price warning

Business leaders have predicted interest rates will need to rise early next year as they issued a warning about "unsustainable" house prices.

The Confederation of British Industry (CBI) expects a rise of 0.25 per cent in the first three months of 2015, from 0.5% to 0.75%.

The CBI said it was crucial for governments to focus on increasing housing supply. Credit: Yui Mok/PA Wire

The business lobby group previously predicted the Bank of England would have to start raising rates in the third quarter of next year - but has now brought that forward to the first quarter.

The CBI also raised its forecast for the UK's gross domestic product forecast for this year from 2.6% to 3%.

Director-general John Cridland said property values were expected to rise by 8.2% this year, and 5.1% next.

But he warned: "We have to remain alert to the risks posed by unsustainable house price inflation, and the (Bank's) Financial Policy Committee is poised to act when necessary."

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