Base rate frozen

Posted: 03 Aug 2007 11:22:00 GMT

The Bank of England has decided to hold the base rate at 5.75 per cent.

The Bank of England has decided to hold the base rate at 5.75 per cent.

An announcement was made following two rate rises in three months, which had left many mortgage holders very concerned.

However, the Bank's Monetary Policy Commission (MPC) chose to stick with the current rate and wait to see the effects of previous increases.

Since August 2006 the Bank has increased the base rate by 1.25, bumping it up from 4.5 per cent to 5.75 per cent in less than year.

This is having a serious effect on mortgage holders and other borrowers but some analysts are now predicting that rates may have peaked.

"We can see that the housing market beyond London is weakening, retail sales may be moderating and low unemployment has not pushed wage inflation up," said Dave Chappelle from Threadneedle Investments.

"So the arguments for another move are finely balanced but we think 5.75 per cent base rates will be enough to achieve the moderation the Bank is seeking."

The MPC's decision caused widespread relief throughout the industry, with Alliance & Leicester saying that it will offer borrowers a "welcome break".

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