Interest rates remain frozen

The Bank of England has today announced that it will hold base rate at 4.75 per cent for the remainder of the year.

12:07 09 December 2004

The Bank of England has today announced that it will hold base rate at 4.75 per cent for the remainder of the year.

After a period that saw rates rise five times in ten months to a three-year high, this is the fourth successive month that the Bank has held interest rates.

The overwhelming majority of commentators predicted that the rate of borrowing would be held by the Monetary Policy Committee, but are split on what will happen next year.

"In line with virtually all market commentators, we expected that the Bank of England's Monetary Policy Committee would leave the official base rate unchanged at 4.75 per cent this week," said David Frost, director general of the British Chambers of Commerce.

However, he was not entirely satisfied with this result, feeling that lowering interest rates would aid business.

"From a manufacturing perspective, it [the decision to hold rates] was inadequate. Sterling's relentless rise against the US dollar, inevitably cause problems for many manufacturing companies ... one cannot rule out the possibility that interest rates have peaked and, if pressures on industry worsen, they may have to come down."

He added: "Recent comments by Bank of England officials & the OECD, indicating possible interest increases in 2005, are premature, and potentially harmful for manufacturing."

The Bank of England raises and lowers interest rates with the goal of keeping inflation as close to its target rate (two per cent) as possible.

Hikes in interest rates raise the cost of borrowing and increase the benefits of saving.

With only 17 per cent of UK householders on a fixed or capped rate mortgage any changes made by the Bank directly affect homeowners.

The five interest rate hikes since last November added ten per cent to the monthly repayment on a 100,000 mortgage according to HBOS, and are widely seen as having helped to cool the UK property market.