Interest rates remain on hold for now

The Bank of England has decided to keep interest rates on hold for the month of March, announcing after the most recent Monetary Policy Committee meeting that interest rates would have to remain static at 5.25% despite calls from industry professionals and homeowners to cut rates in order to improve the economy and raise consumer confidence.

The central bank has stated that whilst it understands that many households are suffering financially, and that this is having an adverse effect on the economy and on consumer confidence, it also has to take into account the danger of rising inflation, and therefore deciding on the movement of the base interest rate has become a fine balancing act.

Between August 2006 and July 2007 there were five 0.25% interest rate rises, and this left many homeowners on variable rate mortgages struggling to keep up with repayments.

The situation was eased very slightly when the Bank of England cut the base interest rate by 0.25% in December of last year, and there was another rate cut of a further 0.25% in February.

However, interest rates are still significantly higher than they were before the series or rate hikes began, and there are now concerns that consumers that are due to come off cheap fixed rate deals will be unable to keep up with repayments on their mortgages unless the base rate comes down further.

A number of analysts and industry experts have predicted that the base rate will fall again at least once before the summer, and that there will be further rate cuts in the second part of the year, which could help to bring the base rate down considerably by the end of the year.

However, the governor of the Bank of England, Mervyn King, recently said that interest rates may not fall as fast or by as much as some seem to think.