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Interest rate held at 5.5%

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The Monetary Policy Committee of the Bank of England has voted to maintain the Base Rate at 5.5%.

The freeze was widely expected, in light of a dip in high street spending and, perhaps more significantly, falling mortgage approval numbers indicating a cooling off in the housing market.

Borrowers appear to be responding to the four interest rate increases implemented since last August, by tightening their belts.

Halifax announced today that monthly house price inflation has fallen to just 0.3%, although annual inflation remains relatively high, at 10.6%.

Mortgage borrowers’ payments will not change today, but further rate increases are anticipated later in the year, pushing up the cost of borrowing. And a number of other concerns remain regarding the market. Michael Coogan, director general of the Council of Mortgage Lenders, commented: “While today’s decision not to raise rates is welcome, there is no cause for complacency. More than two million borrowers over the next year and a half will reach the end of fixed-rate deals, and will face the prospect of higher mortgage payments.

“For most people, the scale of the increase will be manageable. But it makes sense for borrowers whose fixed-rates will end soon to start planning ahead now, and to recognise that their monthly costs will be higher in the future. Anyone who thinks they may face financial difficulties should talk to their lender at an early stage to see what steps can be taken to improve their situation.”

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