Lloyds: 'Bank set to hold base rate'

The Bank of England is due to make a decision on the base rate of interest this week and Lloyds TSB believes that it will choose to maintain it at its current level.

The Bank's Monetary Policy Committee (MPC) will meet on October 4th and homeowners will be hoping that interest rates are not increased.

After five rate rises since August 2006, many borrowers are growing concerned that they will fall into mortgage arrears if rates continue to increase.

However, Trevor Williams, chief economist at Lloyds, thinks that there is nothing to worry about in October at least.

"Despite the ongoing turmoil in world markets, we're almost certain to see the Bank of England hold rates this week," he said.

"The housing market has proved remarkably resilient to the interest rate increases seen so far and is only just starting to slow down. Moreover, the economy remains pretty robust, with growth and retail sales figures both still strong, meaning a rate cut is almost certainly ruled out.

"However, with inflation comfortably under its two per cent target, wage inflation rising slowly - at 3.5 per cent year on year - and continuing turbulence in the credit markets, it is equally certain there will not be a rise," added Mr Williams.

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