As predicted, the six-year high interest rate of 5.75 per cent is to remain at a standstill. After an unprecedented period of economic stability, we've got used to low interest rates so what does this mean for homeowners?
For the best part of a decade, low interest rates have allowed banks to offer affordable mortgages fuelling a housing boom. Property prices have surged with many homeowners making a small fortune in just a few years.
With the value of their homes rocketing and cheap money available in the form of credit card deals and personal loans, British consumers have piled on the debt, with the combined figure topping £1 trillion by the end of last year.
A bullish attitude towards borrowing and other pressures such as rising energy prices have forced the Bank of England to start raising the cost of borrowing. Since August 2006 there have been four quarter-point rate rises leaving some homeowners facing a battle to meet their monthly repayments.
The cost of some mortgages would have increased by 50 per cent between July 2003, when the base rate was just 3.5 per cent, and today with the rate sitting at 5.75 per cent.
"A bullish attitude towards borrowing and other pressures such as rising energy prices have forced the Bank of England to start raising the cost of borrowing."
"Clearly the major impact will be on homeowners with mortgages and many of us will have to get used to a new standard of living as the cost of mortgage repayments hits home," predicts Sean Gardner, chief executive of MoneyExpert.com.
According to the Council of Mortgage Lenders the uncertainty about when the current upward trend in interest rates will plateau is prompting 80 per cent of new borrowers to opt for a fixed rate deal, which guarantees the same repayments for an agreed period.
And while another base rate rise next month looks a certainty, there is light at the end of the tunnel for homeowners nervous about the cost of their tracker or facing a shock when their current fixed rate runs out.
The latest CPI figures show inflation has fallen to 2.4 per cent, within the Bank of England's target range. This suggests that the policy of steady rate rises is having the desired effect and that this year's fourth rise might be the last for a while.
It is also worth remembering that 6 per cent is still relatively low. When Labour came to power in 1997, and first awarded control over interest rate policy to the Bank of England, the rate stood at 6.25 per cent, rising to 7.5 per cent in June of the following year. Even that was around half the levels seen in the dark days of the 1980s.
