Borrowers relieved with no rate change

The bank’s monetary policy committee (MPC) voted to keep the base rate at 4.5 per cent rather than raising it as feared, which would have increased the amount people would repay on loans.

Last month Bank of England governor Mervyn King said that the economy was continuing to show “steady” growth but has not ruled out a later increase in the interest rate.

Rate-linked mortgages and loans are based upon the base interest rate, so any increase in this would have bumped up the amount to be repaid each month.

With Ernst & Young already warning that the average home is worse off than just five years ago, more repayments could have seriously affected those living on the edge of their borrowing limits.

Despite the current freeze on the interest rates, many economists are predicting a rise later in the year, meaning that those on loans may only have a slight reprieve on higher debt repayment.