Interest rates pegged at 4.75%

5 October 2006

Your mortgage repayments should stay the same this month – as the Bank of England’s interest rates-setting committee has voted to keep the base rate on hold, at 4.75%.

The Bank’s Monetary Policy Committee (MPC) kept interest rates on hold last month – but its surprise decision a month earlier to raise rates from 4.5% to 4.75% has left the City jittery.

Analysts say that recent economic data indicates that the UK economy is able to absorb another rise in the base rate – which could come as early as November.

So why is another rate rise likely? The biggest factor likely to sway the MPC is the fact that inflation remains high. It’s currently running at 2.5%, which is well above the Government’s 2% target. And the housing market appears to be stronger than expected; recent surveys from two of the UK’s biggest mortgage lenders – the Halifax and Nationwide – indicate steep increases in average house prices.

Global Insight economist, Howard Archer, said a rate rise to 5% before the end of the year was “not inconceivable”. He said: “A potential rates move in November is certainly still flashing brightly on the radar.”