No change again in interest rate

The country's homeowners got an early Christmas present from the Bank of England today when the monetary policy committee left interest rates unchanged at 6% for the 10th month in a row.

Mortgage prices should now remain stable, helping the millions of homeowners who are mortgaged to the limit because of the country's runaway housing market.

This should help allay the fears of Financial Services Authority chairman Howard Davis who, earlier this week, warned that new buyers are over-stretching themselves - often borrowing more than three times their annual income - and could find themselves in negative equity if house prices fall.

It will not come as such good news to savers who, for nearly a year now, have seen the interest on their deposits remain static.

The decision to not to change marks the longest period of static interest rates in 10 years and, according to market commentators, is evidence of a slow-down in the British economy spurred by weak industrial production and a sluggish retail sector.

If this slowdown continues, and it certainly looks set to with a similar slowdown in the US having knock-on effects in the UK, rates could be cut even further.

At 2%, the rate of inflation is well below the government target of 2.5%, which means the Bank of England does not need to keep interest rates high to control inflation. However, analysts say a rate cut is unlikely before next spring. Christmas bonuses and end of year pay settlements may distort economic figures in the New Year and the bank will need the situation to settle down before it can properly assess the state of the economy.