Hunker down for five years

The Bank of England left interest rates unchanged at 5% today. The decision is not unexpected given that the Monetary Policy Committee is faced with two equally unpleasant options.

It can either raise interest rates to curb rising prices, but run the risk of plunging the economy into recession, or cut rates to stimulate the economy, but at the risk of stoking inflation.

The quandary in which the Bank of England finds itself could persist for some time. According to a Fool.co.uk survey, almost half of respondents (45%) believe the credit crunch could last another two years. Two in every seven people (29%) reckon it could go on for up to five years.

David Kuo, Head of Personal Finance at money website Fool.co.uk, says: "We are in the middle of a perfect economic storm, and consumers need to batten down the hatches, if they haven't done so already.

"There are no quick fixes to Britain's financial mess, and homeowners need to help themselves by reducing debt. This will not be easy given the pressures on household budgets.

"Most people believe the credit crunch could be long and draw out. But the credit crunch will feel a lot longer the more debt you carry."