By Paul Lewis BBC Radio 4's Money Box

Interest rates are at a 48-year low

A top economist has told the BBC that interest rates may rise in the next four months.

Rosemary Radcliffe, an economist who advises accountancy firm PricewaterhouseCoopers, said the exact timing depended on the economy here and in the United States.

But speaking on Money Box on BBC Radio 4, she said a rate rise was likely quite soon.

"I think the most likely direction is probably now up rather than down.

"I think much depends though on precisely what happens with the UK economy and for that matter the wider global economy over the next few weeks and months, but I think now we may see rate hikes as we move into 2004."

Rate hike 'problematic'

She also warned that such a rise could put people in difficulties if they had borrowed too much on the basis of very low interest rates.

"The UK economy has been held up by consumer spending and that has been on the back of borrowing.

"We can't go like that indefinitely, and if we do see a rate hike then for some people that could become quite problematic."

But she did not think a house price crash was likely.

"In the long term there has to be a reasonable relationship between house prices and people's incomes. But that could be over a time, it does not have to happen in a rush.

"I think we will see a gradual reduction in the rate of house price inflation."

Mortgage rate rises

The prospect of higher interest rates has already led to rises in the cost of mortgages as lenders try to anticipate the future levels of interest rates.

If you miss the cheap [fixed] deals there's a strong case for going for a discounted rate Ray Boulger of mortgage brokers Charcol

Many banks and building societies have raised rates twice in the last few weeks - Nationwide added 0.4% onto its fixed rates last week after a 0.5% rise a few weeks ago.

Ray Boulger, of mortgage brokers Charcol, told Money Box there were still good deals out there.

"There are still a few good cheap fixed rates around such as Britannia with two years fixed at 3.49% but they are going soon and if you miss the cheap deals there's a strong case for going for a discounted rate.

"You can get a good two or three year discount at under 3.5%."

Savers not benefiting

However, although banks and building societies are raising the cost of borrowing in anticipation of an interest rate rise, they are doing the opposite on the money they pay us on our savings.

Money Box found that many banks and building societies have been busy cutting rates over the summer.

Market leader ING Direct for example cut its rate from 4.3% to 4.1% on 1 September.