Bank puts interest rates on hold for now

Its Monetary Policy Committee is apparently keen to study the impact of earlier increases before making another move.

Five rate rises in the past year have swollen mortgage repayments and tipped the household budgets of thousands of families into the red.

The committee is apparently keen to understand the impact of the earlier increases, creating a breathing space, before making another move.

The decision came amid evidence that increasing numbers of people, particularly among the middle-classes, are struggling to keep their heads above water.

Interest rate rises have added hundreds of pounds to monthly home loan bills and have tipped the household budgets of thousands of people into the red.

Figures are expected to confirm a further rise in personal bankruptcies, while sales on the high street are slowing as shoppers tighten their belts.

A report from the Halifax Bank suggested rising rates are taking their toll on the property market by slowing the monthly rate of price growth.

It said house prices rose by 0.7per cent in July, taking the average to just under £200,000 in its index.

This is the fourth month in a row that the rise has been less than 1per cent, however the annual rate of growth is still far higher than the Bank of England would like to see.

The annual rate of property price rises is put at 11.2per cent, which is the highest level for more than two years.

Britain's biggest debt advice charity, the Consumer Credit Counselling Service, said: "Bankruptcies are likely to be up and calls to CCCS helplines are up.

"The biggest problem today for consumer borrowers is no longer the ubiquitous credit card; rather it will come from secured borrowing and the rising cost of mortgage debt."

The CBI said the MPC was right to freeze rates. Its head of economic analysis, Doug Godden, said: "There are signs that high street sales are slowing, while household finances have come under severe strain, so a further rate rise would have risked overkill."

City analysts believe a further quarter point base rate rise to 6per cent is not far off.

Director General of the British Retail Consortium, Kevin Hawkins, said the rate decision would help those who are struggling with their finances.

He said: "Consumers are certainly starting to feel the squeeze. Disposable income growth is at record lows and savings levels are also very low.

"It is obvious that previous rate hikes are already having an effect....What retailers need now is a prolonged period of interest rate stability."

Mortgage lenders and property market analysts are predicting a slowdown over the next few months.

Halifax chief economist, Martin Ellis, said: "We expect the downward trend in house price growth to continue as the five interest rate rises since last summer have an increasing impact on household spending and housing demand."

But he suggested the cooling of the market will be very gradual.

"Sound economic fundamentals, high levels of employment and a shortage in the number of properties available for sale, particularly in London and the South East, will, however, continue to support house prices," he said.

Analysts at Capital Economics expect house price growth to halve by the end of the year.

They said: "New buyer enquiries are falling steadily and mortgage demand is moderating.

"What's more, the full impact of past interest rate rises is yet to be felt by the housing market. And, in our view, there is still at least one more rate rise to come."

Chief economist at the Royal Institution of Chartered Surveyors, Simon Rubinsohn, welcomed the decision to hold rates.

He said: "This will provide some welcome respite for homeowners, many of whom are already facing significant increases in their mortgage costs over the coming months."