Interest rates have been maintained at 5.25% following the monthly meeting by the Bank of England's Monetary Policy Committee.
The last change in interest rates occurred on 11 January when the MPC unexpectedly decided to raise it by 0.25%, catching many in the industry off-guard as a rise in the base rate was not expected so close to the previous increase in November 2006.
Stephen Leonard, director of mortgages at Alliance & Leicester, says over recent weeks there has been growing consensus in the market that the base rate would not rise beyond its current level in March, and today's announcement reinforces this sentiment.
But he warns while this 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”.
He says: "The economy is currently growing in line with market forecasts while inflation and pay settlements remain the crucial factors to watch. Last month's MPC minutes suggest further rate rises are very likely if inflation fails to moderate.”
Jonathan Cornell, technical director at Hamptons International Mortgages, says key housing market predictors over the last month have highlighted the early beginnings of a market slow down, which alongside the decrease in the Consumer Price Index, suggests January’s rise is starting to have the MPC’s desired effect upon inflation.
He adds: “While city analysts still believe a rise is imminent, today’s decision to maintain the base rate at the same level for two months running suggests the MPC are beginning to see the benefits of three successive rate hikes in the past seven months. While borrowers may be in for further mortgage misery it seems they can sleep easy for another month.”
Meanwhile Stuart Law, managing director of Assetz,k says the Bank has made "absolutely the right decision" in maintaining interest rates as inflation is currently under control and is expected to come down sharply towards the end of the year.
He adds: "The property market is robust and experiencing moderate growth in most areas, but this has nothing to do with interest rates and everything to do with lack of supply. "We believe interest rates will peak at 5.25% and within 12 months will be back to 5%."
Minutes of today’s MPC meeting will be published on Wednesday 21 March.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7034 2681 or email [email protected]IFAonline
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Alongside Barrett, Hopkins, Boston and Thorman on 17 October