Interest rates kept on hold

7 December 2006

Your mortgage repayments should stay the same this month – as the Bank of England has decided to keep interest rates on hold at 5%.  The move had been widely predicted by analysts.

Last month, the Bank’s rates-setting group, the Monetary Policy Committee, or MPC, raised the cost of borrowing to 5%.  That’s the highest it’s been in five years.  There’ve been two rate rises in the past four months, and the feeling in the City is that the Bank will keep rates on hold in the near-future, as it considers the impact on inflation of those recent increases.

Economist Steve Radley said:  “The last two increases have bought the Bank some time which it should use to assess the direction of the economy in the New Year.”

However, some financial analysts believe that interest rates could rise by a further quarter of a percentage point – to 5.25% – early next year.  This is because UK inflation remains above the target rate of 2%, at 2.4%.