Rate hold decision a close shave, predicts Charcol

Charcol has predicted that the Bank of England&#39s decision to hold base rates at 4% was probably a close shave.

Senior technical adviser Ray Boulger says that with a mixture of both positive and negative economic news emerging over the last month, it must have been a difficult decision to make.

He says: “The MPC probably feel they are between a rock and a hard place, with the housing market showing renewed strength and consumer spending still buoyant, but other sectors, particularly manufacturing, struggling to make much headway.

“Furthermore the sterling remains strong against the dollar and is improving steadily against the Euro. With the European Central Bank and the Fed unlikely to increase rates in the near future, and speculation about a drop in the ECB&#39s current 2% rate, it is unlikely the Bank of England will want to widen the interest rate gap too far. This is one factor likely to restrain the amount and speed of base rate increases in the UK.”

Boulger says that the best value is still to be found in discount or tracker mortgages unless the base rate increases to over 5%. However, he says some borrowers will consider it is worth paying the higher initial price of a fixed or capped rate for the security and peace of mind they offer, despite some of the best fixed rates having been re-priced upwards this week.