Bank ‘will maintain cost of borrowing’

The Bank of England will maintain the cost of borrowing at its current level of 5.75 per cent “for the time being”, according to one expert.

In what will come as welcome news for many British consumers in search of a debt solution, the bank’s recent letter to the Treasury committee appears to alleviate fears that the base rate of interest will reach six per cent before the end of the year.

Assessing the content of the letter, Howard Archer, chief UK and European economist at Global Insight, suggests that the base rate of interest will not be increased beyond its present level, which is already a six-year high.

“We currently forecast interest rates to remain at 5.75 per cent for the rest of this year and well into 2008 before being trimmed,” said Mr Archer.

“The bank is clearly determined that any action that it takes is not seen in any way as encouraging future risk taking by banks and other financial institutions,” he added.

Many homeowners and credit consumers have faced increased financial pressures in recent months in the wake of five rises in the cost of borrowing since August of last year.