Interest rates held at 5%

The Bank of England has voted to hold interest rates at 5% for May.

The central bank’s Monetary Policy Committee reduced rates last month and despite pressure from the mortgage market it has now decided to hold for a further month.

The decision is likely to be in response to fears of rising inflation.

Ross Bowen, managing director of Connells Survey & Valuation, says: "A cut in the base rate would have boosted confidence in the property sector but we’re in uncharted territory at the moment.

"In spite of three interest rate cuts since December, borrowers haven’t benefitted from lower mortgage rates, and banks’ significantly reduced lending is making the situation worse.

The truth is, the Bank of England base rate has become completely detached from the cost of borrowing for the man on the street.

"The UK housing market is vulnerable at the moment. The number of people buying houses has halved in 12 months. And it's now more crucial than ever that the government, Bank of England and lenders work together to tackle these issues."

Experts say that the MPC must cut rates soon to help the economy. John Postlewaite, principle at Punter Southall, says: "A further rate cut is desperately needed, with the house price index from both the Halifax and the Nationwide showing year on year reduction in the value of property and The Council of Mortgage Lenders predicting that the volumes of mortgages available this year will fall, homeowners are desperate for some rest bite and good news."

Andrew Montlake, of mortgage brokers Cobalt Capital, adds: "The MPC has historically seemed reticent about back-to-back base rate cuts. However, this cautious approach is disappointing, because a strong stance may be just what is needed to start rebuilding confidence in the financial markets."

But Montlake admits that a cut in May would not have offered a quick-fix solution to the current crisis. "Lenders are still faced with a lack of liquidity and little confidence in the financial markets. Small base rate cuts alone are unlikely to have any major effect, especially as many lenders are not able to pass these cuts directly onto the consumer given the current funding costs," he says.

"A rate cut in June is now looking extremely likely, but until the MPC broadens its horizons from just concerning itself with keeping inflation n check, and starts focusing on the wider issues, we are unlikely to see a change in policy."