Rate rise relief on the cards

ALMOST every economist in the City believes the Bank of England will spare millions of homeowners more mortgage pain today by leaving interest rates on hold.

The Bank's nine-strong monetary policy committee has nudged up rates two months in a row, to 4.5%, to dampen the housing boom and bring consumer debt under control.

But it is widely expected to conclude its two-day meeting by putting off another rise until at least August.

While there are growing fears the economic recovery is leading to a build-up of inflationary pressure, economists believe the MPC will wait for the Bank's inflation forecasts in August before acting.

Little trading is expected on the FTSE 100 share index before the midday verdict. One dealer said: 'The market is factoring in a no-change. If rates go up, then you'll see a fairly big move down.'

The MPC last raised rates three successive times when it took over rate-setting duties in 1997. It has made four quarter point increases since last November.

ABN Amro economist James Carrick is one of the few putting their money on another rise today, arguing it is better to tighten policy now and foster a softer landing when housing prices ease.

He said: 'Bank of England Governor Mervyn King has hinted that house prices are overvalued and likely to fall. If that's the case, you want to raise rates as quickly as possible. The longer you leave it the more difficult it will be to avoid the problems.'