Interest rates are expected to remain at 5%, according to analysts, as the Monetary Policy Committee (MPC) prepares to announce its latest decision.
The bank last cut rates in April, but a sudden jump in inflation in the same month, coupled with ongoing rises in fuel and food costs, have made it difficult for the Bank of England to justify a cut.
Those with interests in the housing market have called for the MPC to cut rates to bring some relief to homeowners, who are now facing the prospect of higher borrowing costs and lower house prices.
However, lending rates for mortgages have recently become detached from base rates due to the credit crunch, which may reduce the effectiveness of any cuts made by the Bank of England.
Charles Wasdell, director of Moveme.com, says: “Whether the Bank of England decides to cut interest rates this month or not, will have little impact on today’s home buyers.
"While a correction in house prices was needed, the continued, overly cautious approach now being employed by lenders is having a detrimental impact on the market."
Some economists predict the UK is likely to enter a recession in the near future, with Legal & General’s James Carrick suggesting that several major indicators of the UK economy were on red alert.
The MPC would ordinarily cut rates to help ease pressures on borrowers and boost consumer spending, keeping the economy afloat. However, concerns over inflation have persisted and many commentators, including the Council of Mortgage Lenders, do not expect rates to be lower than 4.75% by the end of 2008.
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