UK interest rates kept on hold at 5.0%

The Bank of England’s Monetary Policy Committee today voted to maintain UK interest rates at 5.0%.

The previous change in Bank Rate was an increase of 0.25 percentage points to 5.0% on 9 November 2006.

Mehrdad Yousefi, Head of Intermediary Mortgages at Alliance & Leicester, said: “As expected, the Bank of England has maintained interest rates at 5% even though the UK economy has been very buoyant, with strong activity particularly evident in the housing market despite the recent rate rises.

“Most commentators still believe there is a likelihood of an interest rate rise sometime in early 2007. However, the sharp fall in the US Dollar and the unexpected downturn in manufacturing statistics have probably been responsible for no movement in rates this month."

“Despite two recent rate rises, there are some competitive fixed rates and trackers available for borrowers. For the more cautious, opting for a fixed rate makes sense especially as a further base rate rise may be around the corner.”

Trevor Williams, chief economist at Lloyds TSB Corporate Markets, said: "If the MPC had opted for another rate rise this month, it could have set the alarm bells ringing unnecessarily.

"House prices, inflation and money supply growth may all be causes for some concern, but there was no need for drastic action this time around. It's true that house prices have continued to rise since last month's base rate rise, but it is probably too early judge the real impact of the two rate increases since August, so the MPC has wisely decided to hold off. As for wage inflation - although it is rising, it is not serious enough yet to merit a further increase and in any event unemployment is still rising."

"With the holiday season now upon us, we can probably expect rates to stand still until February next year."