The Bank of England's Monetary Policy Committee (MPC) has chosen to keep the Bank Rate at 5 per cent, despite increasing pressures hitting UK households.
The Bank Rate has not changed since April when it fell to 5 per cent. And, although the news of a freeze has not come as a shock, a further reduction would have been welcomed by Brits that are feeling the squeeze as the UK heads towards a recession.
The Bank of England
's MPC yet again faced a tough decision over the Bank Rate as inflation threatens to damage the UK economy further and make a recession certain. Inflation currently stands at 4.4 per cent, more than double the target rate and it threatens to increase.
However, MPC member David Blanchflower - who has done nothing but vote for a Bank Rate cut of 0.25 per cent so far this year – spoke before the meeting of his theory that fears over inflation are 'misguided' and a rate cut is needed to relieve the financial pressure currently facing Brits.
The price of oil is now starting to come down, and this is a key indicator of inflation levels, although not yet reflected in the increased petrol, gas and electricity
costs hitting Brits.
Commenting on the latest Bank Rate decision, head of mortgages at moneysupermarket.com, Louise Cuming, said: "Currently we have the competing challenges of inflation at more than double the government target and economic growth well below trend. We have a weaker pound against the Euro and the dollar, the fastest rising unemployment since 1992 and a stagnating housing market, so it was essential the economy wasn't depressed further with a rate increase nor was inflation bumped up with a decrease."
Housing market activity is continuing to slow as mortgage
approvals fall due to lenders reluctance to risk, Ms Cuming added: "So what will this mean to new borrowers – very little. As we have repeatedly said, Monetary Policy Committee decisions have become increasingly divorced from the actions lenders take. We have seen significant downward trends in cost of products over the past month, which is good, but those products are only available to the chosen few.
"There is still a lack of funding and aversion to any risk in the mortgage market and this will continue to be the driving force behind product pricing, not the decisions made by the MPC."
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