Interest rates kept on hold

8 February 2007

Mortgage holders can breathe a sigh of relief – the Bank of England has voted to leave interest rates unchanged this month. The decision means that the base rate will stay at 5.25%, after January’s surprise rise.

Last month, the Bank increased rates from 5.0% to 5.25% in a bid to curb inflation, which was at a record high of 3%. This was the third occasion that the Bank had raised rates since last summer. Its rates-setting committee, the MPC, increased the base rate by one quarter of a percentage point each time in August, November and January.

This month’s decision to leave interest rates unchanged will give many homeowners some much-needed breathing space – but should they be bracing themselves for further increases this year?

Most experts haven’t ruled out a further rise in interest rates in the near future. One economist – Howard Archer of Global Insight – says this month’s decision may prove to be only a “temporary reprieve”. He said: “We currently expect 5.5% to be the peak in interest rates, but there is still a very real risk that interest rates could go higher still”.