9 March 2007
Debtors will be able to breathe a sigh of relief after it was revealed that the monetary policy committee (MPC) voted to keep the base rate at 5.25% yesterday.
The result was not a complete surprise as the last MPC meeting had resulted in a split vote and many financial experts took this as a sign that the economy was beginning to stabilise after a dramatic leap in inflation.
For the thousands of Britons with secured loans this will be extremely good news as the result means that their repayment rates won't shoot up again at the end of this month.
Many of the major high street banks have commented on the MPC's decision, with most warning that although yesterday's verdict will provide borrowers with some breathing room, more rate rises are forecast for the future.
Stephen Leonard, Director of Mortgages at Alliance & Leicester, warned: "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."
Trevor Williams, Chief Economist, Lloyds TSB Corporate Markets, agreed with Mr Leonard, adding: "The MPC's own projections are that a further rate rise is needed to steer inflation back on course in the longer term, so it's safe to say we can expect another increase in the next couple of months."
Global Insight analyst Howard Archer agreed that a further rate rise was on the cards, but predicted that it would peak at 5.5%, adding that the exact timing of the anticipated interest rate rise is "likely to depend critically on the strength of economic activity and inflation data over the next few weeks as well as wage developments".
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