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UK Rates Unchanged

The Bank of England has put interest rates on hold for a second month. The rate, which stays at 5.25% is likely to please borrowers but is predicted however to rise in May. The last change to interest rates was on January 11 th when the MPC unexpectedly increased the rate by 0.25%.

Recent studies have shown inflation rising and retail sales growing strongly, inflation pressures are widely expected to trigger another rise soon.

MPC members voted 8 to 1 to keep the rates on hold. T he last vote came against fluctuating stock markets worldwide, which raised concerns over the possibility of wider economic contraction.

Mervyn King, the Bank of England's governor, has suggested such instability could occur again, as worries over the US economy remain. Further to that, Barry Naisbitt, chief economist at Abbey, said last month’s decision to hold rates had acknowledged some of the uncertainties in the economy.

Indications show that the drop in CPI inflation in January is the key factor to keeping the rates unchanged in March. The following month saw inflation rise to 2.8% well above the governments 2% target.

Other data from the month shows house price inflation at nearly 10%; this is according to Nationwide Building Society. Halifax figures suggest property inflation was 11.1% in March.

Meanwhile director of propertyfinder.com Nicholas Leeming, says confidence in the housing market is still strong, but there are signs of a slowdown, as after three rises since the summer, buyers are increasingly sensitive to interest rates.

Experts predict interest rates will reach 5.5% later in the year and do not expect them to rise any further.