Bank of England holds rates at 5.75%

Thursday, 8 November 2007 12:00 AM

The Bank of England's monetary policy committee (MPC) voted today to maintain the base rate of interest at 5.75 per cent.

This is the fourth consecutive hold from the MPC, with the last change a 0.25 per cent increase on July 5th this year.

However, a drop in the rate was called for by some, to alleviate affordability issues in the housing market.

"The MPC has held the base rate for four months now, but with inflation slightly below target and house price growth subdued, it is about time we saw a drop," said David Austin, managing director of investment consultants Property for Life.

"We believe a quarter percent cut before Christmas is needed to boost consumer confidence and stimulate spending."

Further increases would be detrimental to the economy, the organisation argued.

"Consumer debt and repossessions continue to rise and a further increase in interest rates would place unnecessary pressure on homeowners and investors," continued Mr Austin.

But the long-term picture is robust.

"Although investors are currently feeling the pinch, this has not reduced the desire to buy; with 76 per cent of investors questioned for our confidence tracker still believing now is a good time to buy," said Mr Austin.

"The long-term returns of an investment in property remain strong."

There were also calls to lower interest rates as a method of increasing liquidity in the market.

"The Bank of England is risking the economic stability of the UK by refusing to lower bank base rates in the face of the already significant rise in rates over the last year and greater difficulty in controlling credit following the recent credit crunch," said Stuart Law, chief executive of Assetz.

"It's about time the MPC saw sense and realised the clear and present danger to the UK economy from the continuing effects of the credit crunch is more important than the less clear possibility of future pressures upwards on inflation."

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