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Conundrum for bank

The Bank of England’s monetary policy committee held base rate at 5 per cent last week amid conflicting pressures of inflation and a struggling house market.

With inflation at 3.8 per cent in June and predicted to rise above 4 per cent this year, the MPC had faced calls to raise base rate but was also under pressure to help borrowers with a rate cut.

Hamptons managing director Jonathan Cornell says: “If inflation at 3.3 per cent cannot force the MPC into making a decision, I do not know what will. Any increase in base rate signals worries for borrowers but unstoppable inflation is not a happy compromise.

“June, like May, did little to raise people’s spirits. Rising energy and food costs, coupled with decreasing house prices, will mean some people have felt more than just a pinch. Consumer confidence continues to plummet and there seems very little to keep our hopes up.”

Cornell says borrowers should spend time arranging their finances and warns that if inflation continues to rise, lending rates will also increase.

Mortgage Advice Bureau head of lending Brian Murphy says: “The monetary policy committee’s prime concern is to keep inflation in check but factors such as a bleak housing market, as well as rising food and energy costs, have pulled the MPC from pillar to post in its decision over which area to prioritise.”

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