Many mortgage holders will be breathing a sigh of relief after the Bank of England announced that the base interest rate would remain at its all time low of just 0.5 percent for yet another month. It is nearly two years ago now since the base rate was slashed to the lowest level in the history of the Bank of England, and despite calls for rate increases in order to curb inflation the decision has been made to keep rates on hold for now.

For mortgage holders with variable rate mortgage loans this means that they do not have to worry about rocketing monthly repayments at a time that is already financially difficult for many. This is the 22^nd month where the base rate has been on hold at this rock bottom low, and comes despite the fact that the last meeting in January saw a couple of Monetary Policy Committee members voting for a rate increase to try and bring the spiralling rate of inflation under control.

Many had thought that the base rate could be increased this month because of the increasing speculation that inflation could hit a massive 5 percent this year, which is way above the 2 percent target set by the government. However, the MPC has clearly decided that concerns over the economy outweigh concerns over inflation, hence the decision to keep the base rate at 0.5 percent.

However, one economist said that the move has come as no surprise. He said: ‘Wage settlements are the key – with no sign of any second-round [inflation] effects, there is no reason for the MPC to raise rates. We calculate that if you strip the VAT effects out of core inflation, you are left with an underlying rate of inflation that is close to 1%. Though the pressure [on the MPC to raise rates] will become increasingly fierce, we expect the MPC to be able to hold firm for the whole year.’