Bank expected to keep interest rates on hold

The Bank of England was expected to keep interest rates on hold today at 4% amid further evidence that the housing market is continuing to boom.

Rates have been held steady since November 2001, despite mounting pressure from industry for the Bank to move to protect the UK from global economic weakness.

The Bank's nine-strong Monetary Policy Committee (MPC) has held off lowering the cost of borrowing for fear it would further stoke the red-hot housing market.

The dramatic house price rises over the past year - fuelled by lower interest rates - have sparked fears of price falls and raised concerns from economists that people are digging themselves into a mountain of debt.

Data this week from Nationwide confirmed prices are still rising, showing annual inflation in November hit 25.5%, the highest for 13 years. In addition, data on Wednesday showed continued growth in the services sector.

Further supporting the argument for holding rates was the Bank's recent inflation report which projected inflation at or above the 2.5% target - set by chancellor Gordon Brown - for the majority of the next two years.

The Amicus union today increased the pressure on the Bank to reduce rates, warning of more manufacturing job losses if rates are not cut.

Amicus general secretary Roger Lyons said: "If the MPC continues to be so cautious and put house prices in the south-east before jobs across the nation we can expect to see thousands more jobs on the scrap heap."

Although UK rates are expected to be kept on hold today, the European Central Bank is widely tipped to cut rates in the eurozone.