Bank of England keeps interest rates at 5.25%

On 6 March 2008, the Bank of England decided to hold interest rates at 5.25%. The decision was expected from analysts and economists as the Bank tried to balance a weaker economic outlook with growing inflationary pressures.

The Bank last cut interest rates in February, from 5.5% to 5.25%, constituting the second cut in interest rates in three months. Analysts still believe a further interest rate cut is likely this year, unless the economic outlook suddenly worsens.

Today's decision came after the latest property market data from Halifax highlighted a continued slowdown in the mainstream property sector, driven by a tightening of lending criteria from mortgage companies and continued buyer caution. According to Halifax, prices fell by 0.3% in February, decreasing the annualised growth rate in prices to 4.2%.

In contrast, however, asking prices for prime property continue to defy the current economic conditions, according to the Primelocation.com House Price Index. In February, average asking prices for prime London property rose by 3.0%, while prime country property prices rose by 1.1%.

Commenting on the latest prime property data, Ian Springett of Primelocation.com said, "Despite the uncertainty in the money markets and pessimism surrounding the general economic outlook, the prime London and country property markets continue to produce robust monthly growth in asking prices. While these prices suffered towards the tail-end of 2007 due to the accumulation of record volumes of prime property for sale, stock levels are beginning to recede, increasing the competition for the remaining properties available".

Certainly, the restrictions on lending imposed by the banks since the 'credit crunch' seem to have had less of an impact in the prime property sector, as the majority of buyers are less reliant on mortgage borrowing to achieve transactions.