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News: Interest Rates Held At 5%

Thu, 07 Aug 08

The Bank of England’s Monetary Policy Committee has kept interest rates on hold at 5%.

The move was widely expected but is described by the BBC as likely to have been “one of the most difficult in recent times."

Minutes from the MPC’s previous meetings show its members are increasingly split over the short-term future of interest rates.

Last month the minutes showed that one member, David Blanchflower, continued his argument for a rate cut, to ward of recession and help struggling homeowners.

Meanwhile others such as Timothy Besley called for a hike in a bid to stave off increases in inflation.

The Council of Mortgage Lenders says that despite the decision previous rate cuts over the last 12 months have already providing some respite for struggling homeowners.

Its latest statistics show that for the second quarter of 2008 the average mortgage rate was 5.76% and the average monthly repayment on a £100,000 mortgage was £630.

This is a dramatic improvement on last year’s figures. In the fourth quarter of 2007 the average mortgage rate was 5.97% and for the average monthly repayment on a £100,000 mortgage was £642.

CML director general, Michael Coogan said: “Holding the bank rate is better than raising rates but a reduction would have been a welcome recognition of the current financial strains on households already struggling with hikes in other living costs.

“As a result of recent Bank rate reductions, mortgage rates are below their peak at the end of 2007 but many consumers will be looking to the MPC to respond soon to the slowing economy and reducing inflationary pressures.”

See also: Mortgages: Best Buys

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