Interest rates kept on hold

21 February 2007

There’s a warning that mortgage repayments may go up again before too long – after it emerged that the Bank of England was split on whether to raise interest rates again this month.

Minutes from the Bank’s rates-setting body, the MPC, show that members voted 7-2 to keep interest rates on hold at 5.25% in February. The MPC said more time was needed to see the impact of last month’s surprise rise.

Some financial analysts say the vote points to a further rise in interest rates in the not-too-distant future. The two members of the MPC who voted in favour of a further rate rise said the three increases in interest rates since last August were “modest relative to the rise in inflation”. Inflation is still running above the Government’s target of 2% and recently hit an 11-year high of 3%, although it has since dropped back down a little.

Philip Shaw, who’s an analyst with Investec, said the two votes in favour of another interest rate increase suggested “momentum” for another hike, of a quarter-point. But he added: “The majority opinion appears to be that there is time to wait and see the impact of past rises.”