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The Bank of England voted to keep interest rates at 5.25% for the
second month running in April.
While the decision is good news for borrowers, recent economic data
suggests that rates will rise in May by 0.25% due to UK inflation edging
up and retail sales still growing strongly which is only adding to
the already huge figure for consumer debt.
"Today's decision to hold rates will be welcomed by manufacturers as it
gives the Bank more time to assess whether pay pressures are building up," said
chief economist Steve Radley.
"However, business also recognises that another rise may be needed to
keep inflation in check."
But as always there are differing opinions between experts. March’s
vote to leave rates at 5.25% came against a backdrop of wildly fluctuating
stockmarkets worldwide which although now appear to be less volatile,
Mervyn King, the Bank of England’s governor, has suggested instability
could occur again as worries over the US economy remain. Such concerns
could have an impact on members of the Monetary Policy Committee voting
in favour of keeping rates at 5.25% in May.
The month of March seen annual house price inflation continue to rise
with Nationwide Building Society publishing a figure of 10% while Halifax
suggested the figure was 11.1%. Halifax put the rise down to a strong
economy and shortage of houses for sale but expects prices to ease
later in the year.
"We expect the recent rises in interest rates, negative
real earnings growth and above inflation council tax bills to lead
to slower house price growth over the coming months," said Tim
Crawford, Halifax group economist.
Despite so much speculation over interest rate rises, lenders are still offering
extremely competitive fixed rates which are proving popular with borrowers.
First time buyers in particular are opting for fixed rates to provide security
against any upwards movement in interest rates. But the difficulty for first
time buyers seems to be raising a deposit not the monthly outgoings.
"The difficulty is getting a deposit together, rather than meeting the repayments," says
Bernard Clarke, from the Council of Mortgage Lenders (CML).
"Lots of people in the industry are talking about
assistance from relatives, for instance using the equity in their own
properties."
Research by Bradford and Bingley suggests that 40% of first time buyers
now rely on parents for financial help when buying a home with half
of these parents contributing to the deposit while 17% help each month
with the mortgage payment.
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