Interest rates kept on hold

8 March 2007

Many mortgage-holders will be breathing a sigh of relief, after the Bank of England decided to keep interest rates on hold again this month.

The Bank’s Monetary Policy Committee (MPC) voted to keep interest rates unchanged at 5.25%. There have been three rate rises of a quarter point each since last summer, in August, November and January.

Most analysts had predicted there’d be no change this month, after the minutes from the Bank’s February meeting suggested that MPC members wanted to wait and see what effect the recent increases have had.

While this is good news for borrowers, people with variable-rate mortgages are being warned to brace themselves for another rate rise of a quarter point in the next few months.

The Bank of England recently indicated that interest rates would need to rise one more time, to keep inflation near the Government’s target of 2%. Inflation is currently running at around 2.7% and a short time ago hit an 11-year high of 3%.

There’s uncertainty in the City about when the next interest rate rise will be, but the smart money is on April or May.