THE Bank of England has voted to keep interest rates at a record low level, despite calls for an increase to deal with rising inflation.

It will stay at the 0.1 percent level, with the Monetary Policy Committee having voted 7-2 in favour of the decision.

The current level of inflation was first brought in during March 2020 to help deal with the effects of the coronavirus pandemic.

With price rises having affected many since the economy reopened it had been expected that the Bank would increase borrowing costs.

However, the Bank is holding off for now, saying that interest rates will increase at some point in the coming months.

According to the BBC, the pound fell by nearly one percent against the dollar to $1.3556 following the Bank's decision.

How will this low interest rate affect people?

With inflation expected to peak at five percent next April, which is above the Bank's target of two percent, there will be a price squeeze on many households.

The Bank's latest Monetary Policy Report forecasts that price rises will outpace pay increases in 2022 and 2023.

Additionally, real incomes are not expected to grow much at all in 2024.

The interest rates staying as they are will also impact the housing market.

Tim Bannister, Rightmove’s Director of Property Data said: “Although interest rates are staying at 0.1 percent for now, the expectation that they’re going to slowly start to rise may lead to some buyers accelerating their plans to move and secure a fixed term mortgage deal now, due to a fear of missing out on the historically low rates that were on offer.

“If interest rates do rise in the coming months, as expected, their effect on house prices in the short term may be muted by the ongoing high levels of demand we are seeing and the fact that interest rates will likely still be at levels well below historic norms.

“Buyers who are already facing stretched affordability due to record house prices would find it slightly more expensive to borrow if rates rise in the coming months," he added.

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