Two MPC members voted for rate cut

Worry over the UK housing market boom dominated discussions at the Bank of England's interest rates setting committee's latest meeting, minutes from the assembly showed today.

Two members of the committee continued to press for a reduction in the cost of borrowing this month, while most members were worried that another cut would stoke household borrowing and affect inflation targets.

Christopher Allsopp and Stephen Nickell both voted for a cut in rates to 3.75% but were vetoed by the other seven members of the committee, including the Bank's governor-in-waiting Mervyn King.

The verdict, which was identical to November's vote, meant the monetary policy committee kept rates at a 39-year low of 4% for a 13th consecutive month.

The report said: "The persistent strength of consumption growth and the continued rapid pace of household borrowing and house price inflation suggested that there remained an upside risk to inflation from stronger-than-projected consumption growth."

The committee was also concerned that the period of low interest rates had given households an "unrealistic" perception about their future sustainable levels of consumption.

It added: "The longer any such misperceptions persisted, the greater the imbalances in the economy and the greater the consequent downside risks would become."

But Mr Nickell and Mr Allsopp, who have now voted for a cut three months in a row, believe cheaper borrowing would support the corporate sector and stimulate investment.

They said a cut would only induce a modest additional increase in debt levels and was unlikely to put upward pressure on house prices.