The Bank of England has taken the cautionary measure of not raising interest rates for June.

The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 5.5%. However, many economists predict that another interest rate rise could come soon.

Mark Blackwell, C& G's head of corporate and specialist intermediary sales believes that given the Bank’s customary cautious approach, an interest rate rise was unlikely in June.

“We've seen rates increased four times since last August and these increases are only just starting to show with inflation coming off the boil and new mortgage applications beginning to slow,” he says.

“It’s still too early to judge the real impact of these cumulative increases so the MPC has opted to hold on rates and buy time before making another move.”

The sentiments were echoed by Trevor Williams, chief economist at Lloyds TSB Corporate Markets, who said;

“By holding rates the MPC has bought time to gauge the impact of recent increases, before deciding whether or not it needs to make another move.”

The Council of Mortgage Lenders has urged borrowers who will be coming to the end of fixed-rate deals in 2007 or 2008 to plan ahead for the higher payments they will almost certainly face.

Using data from its regulated mortgage survey, the CML estimates that about 1.3 million borrowers took out fixed-rate mortgages in 2005, and a further 1.5 million in 2006. Most, but not all, of these mortgages would have been fixed for two years.

The majority of these borrowers will face increases of between 0.75% and 1.5% on their mortgage rates.

The CML calculates that the average two-year fixed-rate borrower coming to the end of their fix later this year originally had a mortgage of around £114,000. On a repayment mortgage taken out at 4.6% (the average two-year fixed rate at the interest rate trough of September 2005), this would result in a rise of about £102 a month (from £640 to £742), for a borrower whose new rate is 1.5% higher.

On an interest-only basis the rise is more dramatic, at £143 - although the monthly payment remains much lower in absolute terms than for a repayment borrower, rising from £437 to £580. Most borrowers did not fix at such low rates, and so will not see their payments rise by as much as this.

Michael Coogan, CML Director General, welcomed the decision but believes there is no time for complacency.

“More than two million borrowers over the next year and a half will reach the end of fixed-rate deals, and will face the prospect of higher mortgage payments,” he said.

“For most people, the scale of the increase will be manageable. But it makes sense for borrowers whose fixed-rates will end soon to start planning ahead now, and to recognise that their monthly costs will be higher in the future.”