Interest rates held at 5.25%

The Bank of England’s Monetary Policy Committee today voted to maintain interest rates at 5.25%.

The previous change in Bank Rate was an increase of 0.25 percentage points to 5.25% on 11 January 2007.

Stephen Leonard, Director of Mortgages at Alliance & Leicester: “Over recent past weeks there has been growing consensus in the market that the base rate would not rise beyond its current level in March, and today’s announcement to maintain it at 5.25% reinforces this sentiment. And while this most recent MPC decision will come as a relief to borrowers, we are not out of the woods yet and we shouldn’t be surprised to see at least one further rate rise during the course of 2007.

“The economy is currently growing in line with market forecasts whilst inflation and pay settlements remain the crucial factors to watch. Last month’s MPC minutes suggest that further rate rises are very likely if inflation fails to moderate.

“There are currently some good tracker mortgages in the market and for borrowers with the financial flexibility to withstand short-term rate fluctuations, these can offer a great deal. Alliance & Leicester is currently offering a competitive tracker mortgage with a current headline rate of 4.97%. For borrowers looking for more security and control over their finances, we are offering a three year stepped mortgage with an initial rate of 4.99%, giving homeowners peace of mind by sheltering their borrowings from possible further base rate increases.”

Barry Naisbitt, Chief Economist at Abbey said "Having surprised financial markets and commentators by raising rates to a five year high in January, it seems likely that the majority of members of the Monetary Policy Committee (MPC) wanted to keep rates on hold while waiting to see what effects their pre-emptive strike has had.

"In addition, the MPC will have weighed up the latest economic news and its implication for inflation. I suspect that the two MPC members who voted to raise rates in February will have again voted in that way. With inflation having fallen back to 2.7% in January and the prospect of it dropping further over the course of the year, as signalled in last month’s Inflation Report, the MPC will be closely watching the news on pay settlements and inflation expectations to assess whether it needs to raise rates again in the coming months".