Interest rate decision: A blow to remortgagers

Remortgagers and other mortgage-holders will face "bigger problems" following the Bank of England's failure to reduce interest rates today.

That is according to one mortgage expert who said the decision to keep rates at 5.25 per cent had "delayed the inevitable" and increased the need for a bigger cut at the next opportunity.

Eamonn Rice, chief executive of mortgage advice service mform.co.uk, said it estimated between 40,000 and 60,000 borrowers would be remortgaging every month between now and August.

With lenders becoming increasingly choosy about who they lend to and on what terms, he said, the monthly impacts on mortgage payments would be badly affected.

Mr Rice added: "It is clear the credit crunch is having a meaningful impact on consumer spending and that this will increase as borrowers look to remortgage throughout the year.

"We acknowledge that inflationary pressures are building and accept that there is a concern. However a rate cut is needed and this decision will ultimately lead to bigger problems for mortgage-holders."

Meanwhile David Kuo, head of personal finance at money website Fool.co.uk, said the unchanged rates would come as disappointing news to homeowners, especially the 1.4 million on fixed-rates whose deals are about to end.

They could face a £200 hike in monthly repayments if they are forced on to their lenders' standard variable rates, he warned.

Mr Kuo advised: "People who can't switch may have to drastically cut their household expenditure to afford the higher repayments. But rather than wait for the inevitable to happen, homeowners can overpay their mortgage now by exploiting the time before their fixed-rate deal ends."