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Energy prices have been on the rise again in recent weeks and fears of another inflationary shock are, again, on economists’ lips. For now, though, the Bank of England has just voted six to three to keep interest rates steady at 3.75 per cent.
The decision, just announced by the Bank’s Monetary Policy Committee (MPC) is a relief to Chancellor John Healey and mortgage holders throughout the country, who are beginning to feel the effects of the ending of the MPC’s cutting cycle. Analysis from Moneyfacts – who track the mortgage market – finds that the average new mortgage rate is now 5.59 per cent, well above the 4.9 per cent it sat at at the beginning of this year. If a 0.25 per cent hike had been the way the MPC went, Moneyfacts reckon it would increase average mortgage payments by around £450 a year.
Everyone’s hope then will be that the MPC continues to sit it out for the rest of this year and decides not to make any interest rate hikes (the market now expects at least one). That hope could be forlorn though thanks to two factors in today’s decision.
In the end it will come down to how the situation in Iran evolves
