Interest rates remain 5.25%

The Bank of England has decided to hold interest rates at 5.25 per cent.

It is good news for those with a mortgage, loan or credit card and will be welcomed by the majority of borrowers.

Many experts had been predicting a continued rise in base rates in the coming months, following a steep increase from 4.5 per cent to 5.25 per cent in five months.

However, a number of factors, namely falls in the stock market, commodity prices and a fall in inflation, have reduced the chances of an imminent rise.

The Bank of England’s Monetary Policy Committee (MPC) changes the base rate to keep inflation as close as possible to the government’s two per cent target.

Recent months have seen inflation running well ahead of this, sparking the quick succession of base rate increases.

Last month the MPC was split in its decision to hold rates and economists are predicting that March’s decision will also be a split one.

That does not bode well for the future, although two MPC members have come out indicated that they are strongly against any future rises.

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Bank was split over rate rise

The recent freezing of interest rates caused a split within the Bank of England, with two Monetary Policy Committee (MPC) members voting in favour of a rise.

Minutes of the meeting in February have revealed that the vote was split 7-2 in favour of freezing rates but the divide means that the future for borrowers remains uncertain.

Those with a mortgage, credit card or loan could still see interest rates rise, with many people likely to suffer as a result if they do not have the financial clout to withstand another increase.

MPC members decided to wait and see what effect the previous three rate rises would have before moving ahead with another.

“It would take some time for the full effects of the past tightening to be seen. It was difficult to judge whether, and if so by how much, policy might need to be further tightened to keep inflation on track to meet the target,” the minutes read.

The previous rises came in quick succession, with rates jumping from 4.5 per cent in August to 5.25 per cent in January.

It appears that interest rates are likely to rise again in the coming months as the MPC attempts to bring down inflation which is currently running well above the government’s target of two per cent.

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