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Interest rates stay at 5.75%

Thursday, 4 October 2007 12:00 AM

The Bank of England kept interest rates at 5.75 per cent today, the third month running base rate has stayed level.

The move to keep rates on hold was widely expected by economists and housing market experts, though many are now predicting the Bank's monetary policy committee may vote for a cut next month.

The committee raises and lowers interest rates to try and keep inflation as close to the government's two per cent target as possible. For the past two months this has been below target, dropping to 1.9 and 1.8 per cent in July and August respectively.

"We did not expect the Bank to cut rates today, but we do hope for and anticipate a cut in November," commented Michael Coogan, director general of the Council of Mortgage Lenders (CML).

"Even this is not a certainty though, so borrowers should continue to plan for rates at or around current levels. Pricing in the mainstream market is stable, and fixed rates have started falling recently, but there is still uncertainty about how long it will take for stable funding to return to the sub-prime market.

"In the meantime, borrowers in this sector are facing tighter criteria and higher rates, although the availability of funding does seem to be improving."

Peter Bolton King, the National Association of Estate Agents (NAEA) chief executive, welcomed today's decision, particularly in light of the changes to housing market over the last year.

"The effects of multiple interest rate rises, the introduction of home information packs and recent events on the worldwide economic stage have all contributed to a slowing in the market and a reduction in confidence," Mr Bolton King said.

"We are pleased that the Bank has chosen not to increase rates this month and hope that it will continue to at least maintain, if not reduce rates, over the remainder of the year.

"Confidence in the market is currently fragile and consumers and the industry alike would benefit from a clear indication that the future is positive."

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