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Interest rates remain unchanged Interest rates remain unchanged
(10 minutes later)
The Bank of England's interest rate setters have kept the cost of borrowing unchanged at 0.5% for the third month in a row.The Bank of England's interest rate setters have kept the cost of borrowing unchanged at 0.5% for the third month in a row.
The Bank did not announce any fresh measures to stimulate the economy.The Bank did not announce any fresh measures to stimulate the economy.
Last month, the Bank of England announced it would be injecting an extra £50bn into the economy as part of its quantitative easing policy.Last month, the Bank of England announced it would be injecting an extra £50bn into the economy as part of its quantitative easing policy.
Policymakers are trying to gauge how the economy is faring amid tentative signs of a recovery.Policymakers are trying to gauge how the economy is faring amid tentative signs of a recovery.
A closely watched survey on the service sector released earlier this week suggested that the recovery may be coming faster than expected. A closely-watched survey on the service sector released earlier this week suggested that the recovery may be coming faster than expected.
And UK house prices rose by 2.6% in May compared with April, the fastest rate of growth since 2002, according to the Halifax. Tackling the recession must remain the priority David Kern, British Chambers of Commerce class="" href="/1/hi/business/8037865.stm">What now for borrowers and savers?
But the Bank of England in its latest Inflation Report warned that the economic outlook was still very uncertain. And UK house prices rose by 2.6% in May compared with April, the fastest rate of growth since 2002, according to the latest survey by the Halifax.
Record low interest rates have eased mortgage affordability for many. But in its latest Inflation Report, the Bank of England warned that the economic outlook was still very uncertain.
Caution needed
Business have called on the central bank to increase its £125bn quantitative easing scheme, whcih aims to expand the amount of money circulating in the economy.
"The positive mood in the financial markets should not lull anyone into a false sense of security," said David Kern, chief economist at the British Chambers of Commerce.
"Tackling the recession must remain the priority, especially with unemployment rising and firms continuing to slash investment," he added.
In the housing market, the record low interest rates seen in recent months have eased mortgage affordability for many.
The Halifax index showed that the proportion of disposable income spent on mortgage repayments by a new borrower dropped from a peak of 48% in the third quarter of 2007 to 31% in the first three months of this year.The Halifax index showed that the proportion of disposable income spent on mortgage repayments by a new borrower dropped from a peak of 48% in the third quarter of 2007 to 31% in the first three months of this year.
However, the fall in interest rates has hit savers hard. However, the recent falls in interest rates have led to a sharp drop in the level of interest being paid on savings.