David Field

After three interest rate rises in six months, homeowners will no doubt welcome the Bank of England's decision to hold interest rates steady at 5.25 per cent. Economists were divided in their predictions before today, with some so shocked by the bank's January rise that they had all but given up hope that rates would be maintained. Inflation figures shown to the MPC in January clearly shocked the board into acting pre-emptively and many thought that this might be the case again. Whether we'll see later this month that inflation has receded, only the MPC knows. UK Net Guide's Mortgage Search can search the best value mortgage lenders.

For homeowners, a month of respite is on the cards with banks and building societies not having to raise their mortgage rates in line with the bank rate. Fixed-rate deals signed two or three years ago are suddenly looking like complete bargains as the base rate creeps up. If you signed on for a 5.75 per cent of six per cent deal, as were the offerings in 2005-2006, then you've definitely succeeded in beating the system. As wages continue to swell, and the consumer price index (CPI) continues to increase, the MPC are more likely to play with the rate to ensure this upward inflationary trend is reversed.

Trevor Williams, chief economist at Lloyds TSB Corporate Markets, said: "Over the past few months, the heat has really been turned up on inflation. Pay settlements have hit a five year high, economic growth is above trend and retail price inflation has edged further ahead of its official target, so the MPC will want to do everything in its power to avoid even greater inflationary ills later in the year. An early rate rise would be the best medicine to help head off further increases later on."

However, this last point about reversing the increased inflation is also crucial from a favourable perspective for homeowners. There is a view that inflation has reached its pinnacle for this year and as such the MPC will not wish to raise the rate to high through fear of strangling the economy and restraining the space for continued growth. It's all very well reducing consumer spending and lowering prices, but you don't want to stop spending all together, because that would spell disaster for businesses, markets, investors and so on. This could explain today's decision.

Ray Boulger from John Charcol said: "This decision suggests that the two key pieces of information the MPC will have had access to, but which are not yet in the public domain, are not causing too much concern. The January CPI and the quarterly inflation report will have been key factors in the MPC's decision."