Interest Rates Expected To Be Frozen For Rest Of The Year

For people expecting the interest rates to rise here is some bad news

. Interest rates will be frozen at their historically low rates for the rest of the year, according to the financial expert. The base rate is currently set at 0.5 per cent and the Bank of England's Monetary Policy Committee (MPC) is due to announce their monthly interest rate decision on Thursday (9th September).

Many say this is a deliberate step by the financial planners to stabilise the economy as it is showing slow signs of recovery. With inflation above the government's two per cent target there has been some speculation that the MPC will raise rates. However, Martin Bamford, chartered financial planner at Informed Choice, claims it would "be a big surprise to see a rate hike now".

Most of the British bank customers had hoped that there will be some rise in the interest rates in the coming months but that seems to be a long distant dream. The British economy has been hit by severe credit crisis which has resulted in many people losing their jobs and turning defaulter to the banks, Lenders are these days planning to write off customer dues for credit cards.

He said "There is a real danger that a higher cost of borrowing could stifle economic recovery whilst doing very little to combat inflation, which already seems to be falling." Interest rates have been unchanged since March 2009 when the rate was halved from one per cent. Andrew Sentance is the only member of the MPC who has publicly advocated for an increase in interest rates.

The borrowing cost has been deliberately kept lower to help customers come out of the credit crisis that surrounds them. In such a scenario increasing the interest rates will hit the borrowers directly which most planners do not want.

by: Charles Baker

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