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TODAY'S OTHER NEWS

Will interest rates ever rise?

The Bank of England voted to hold interest rates by 9-0 yesterday which means they will stay at 0.5% for a full seven years.

Rates were cut to today's all-time low in March 2009 and few analysts now expect them to rise this year.

Ian McCafferty, the sole policy maker who had been calling for higher interest rates, changed his mind and voted to keep rates on hold.

Governor Mark Carney blamed a turbulent global economy as the Bank of England cut its inflation forecast once again. 

Given global economic weakness and repeatedly thwarted rate hike expectations it is hard to see when the Bank will finally act. Its next move may even be to cut rates.

US Federal Reserve did increase its lending rate to 0.5% in December but now appears to be backtracking as the US economy slows and China faces a hard landing.

Jeremy Duncombe, director, Legal & General Mortgage Club, said the Bank’s monetary policy committee's decision will be welcomed by borrowers.

“It is good news for anyone looking to secure a mortgage, as there are a number of good deals available at the moment.

“The mortgage market is extremely competitive at present, with many lenders thinning their profit margins to offer lower rates."

Duncombe said borrowers should not be lulled into a false sense of security. “They should instead look to make the most of these rates while they are still available.”

First-time buyers should be particularly wary as they have never experienced rising interest rates, he said. "The most effective way to fully understanding the effects of a rate rise on personal finances is to speak with an adviser.”

Calum Bennie at Scottish Friendly, said: “Today’s unexpectedly unanimous decision to hold interest rates means we are destined to mark the seventh year of historic low interest rates next month.

“The Bank’s decision to lower estimated GDP growth together with its view of continuing low inflation, shows we are still a long way off from a rate rise.”

Ian Kernohan, economist at Royal London Asset Management, said the Bank's dovish inflation report pushed interest rate expectations even further back.

But he said rates will have to rise at some point. "The Bank believes that these global disinflationary pressures will unwind eventually, allowing more domestic inflationary pressures to come through. They have been saying this for some time though.”

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