UK interest rates held at 5.75%

The Bank of England’s Monetary Policy Committee today voted to maintain interest rates at 5.75%.

The previous change in Bank Rate was an increase of 0.25 percentage points to 5.75% on 5 July 2007.

Barry Naisbitt, Chief Economist at Abbey, commented: "The Bank of England held rates at 5.75% today. Financial markets were expecting this decision after last month’s rate rise and will be looking to the Inflation Report and the Monetary Policy Committee (MPC) minutes for guidance on policy thinking and the latest view of inflation prospects. The recent incoming economic data has continued to be strong, supporting the view in financial markets that rates are likely to increase again this year.

"The MPC was, however, divided on the increase last month and future decisions will depend upon the strength of the economic data and, especially, the outlook for inflation. Inflation has fallen from 3.1% in March to 2.4% in June and is expected to fall further in the coming months. The Inflation Report will provide an update on the Bank’s outlook for inflation and, if the MPC considers the risks to inflation to be sufficiently on the upside, a rise to 6% could be on the cards in the next three months."

Stephen Leonard, Director of Mortgages at Alliance & Leicester, commented: “It has been 12 months since the Bank of England started to put rates up after a year long run of maintaining them at 4.50%. With rates now more than one per cent higher than this time last year, this pause will come as a welcome break for homeowners and borrowers.

“It was widely anticipated the rates would remain at 5.75% for August, especially after the quarter per cent rise last month and continued uncertainty within the financial markets over the funding of leveraged buy-outs, stock market volatility and the potential losses that are now emerging out of the US non-conforming mortgage market.

“For borrowers with high levels of affordability, tracker mortgages continue to offer good value in the current interest rate environment. We would have to see another one or two rate increases for tracker mortgages to reach the current rates offered on many fixed products. However, borrowers opting for a tracker mortgage need to be financially comfortable enough to withstand an increase in monthly payments should there be any future rate rises. Alliance & Leicester has a competitive 2 year base rate tracker priced at 5.44% and we have a very competitive low-start 2 year fixed rate at 5.34%. We also have excellent FeeSaver deals which are ideal for first time buyers who want to minimise up-front fees.”