UK Interest Rate: 5.00%

UK Interest Rates Forecast: Rate cut possible in autumn - unlikely before then

Bank of England Keeps Rates on Hold At 5%

The Bank of England has left its base interest rate unchanged at 5% following its Monetary Policy Committee's monthly rate-setting meeting.

It was thought extremely unlikely that the rate would be changed in June due to rising inflation. However, the Bank's current inflation forecast takes into account a cut to 4.75% later in 2008 - and many economists expect to see rates fall accordingly late this autumn.

How Are Mortgage Rates Affected?

Several major mortgage lenders have increased their fixed mortgage rates over the last fortnight. This has been caused by an increase in swap rates - the rate at which mortgage lenders borrow money for fixed rate mortgages - and by lenders' continuing need to bolster their profit margins.

Variable rates seem to be remaining fairly steady at present and in many cases are now lower than current fixed and tracker rates - encouraging some borrowers not to remortgage at the end of their fixed rate but to simply transfer to their mortgage's variable rate.

What the Experts Are Saying About Interest Rates

The Guardian newspaper interviewed several leading economists about their views on this weeks' interest rate decision. Here are a few of their comments.

Howard Archer, chief economist at Global Insight:

"It seems highly unlikely that the Bank of England will be prepared to trim interest rates from 5.00% to 4.75% until August at the very earliest."

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors:

"Modest interest rate cuts alone will not revive the economy but are an important part of the answer."

Graeme Leach, chief economist at the Institute of Directors:

"All in all, the right call. With the economy weakening the MPC won't get any thanks for leaving interest rates on hold, but they really didn't have any other choice."