Interest rates retain status quo as analysts warn of new year cuts
09 November 2007
The Bank of England's (BoE) Monetary Policy Committee (MPC) has today voted to keep UK interest rates at 5.75 per cent.
The current figure is already at a six-year high after five interest rate hikes since last year, so the MPC's decision was widely expected.
However, with the pound hitting a 26-year high against the US dollar, many economists are now predicting that the MPC will start to cut interest rates early next year.
Trevor Williams, chief economist Lloyds TSB Corporate Markets, said there was still a way to go before the MPC needed "to wield the knife on base rates".
"With money supply still growing, strong labour market conditions and continuing robust economic growth, today was clearly not the day for a cut. Equally, with early signs that the economy is set to weaken in 2008 and price inflation still comfortably below target, the Bank was never really likely to raise rates," he said.
"The next move will almost certainly be down, but it's safe to say there won't be any change until February at the earliest."
On what this means to potential homeowners, Stephen Leonard, director of mortgages at Alliance & Leicester, added: "Borrowers looking to buy for the first time, or take out a bigger mortgage, should continue to consider a fixed-rate deal, as this will help give them the security of flat monthly payments. A tracker mortgage is also a sound option for those borrowers who are looking to benefit from the consensus view of interest rate cuts over the next 12 months."
