Homeowners are breathing a sign of relief after the Bank of England voted to keep interest rates on hold at 5.75%.

Economists had widely predicted the decision by the Bank's Monetary Policy Committee to freeze rates following last month's quarter-point hike.

Householders have already faced five rate rises since last August, which together have added around £80 a month on average to the typical £100,000 mortgage.

Businesses also welcomed the decision, and a CBI spokesman said: "There are signs that high street sales are slowing, while household finances have come under strain, so a further rate rise would have risked overkill."

But analysts are warning the respite may be short lived as the cost of borrowing is expected to rise soon, possibly hitting 6% in the autumn.

Fears have been raised that the increases in interest rates are leaving many consumers laden with debts.

The Consumer Credit Counselling Service has seen a surge in the number of calls to its helplines, and insolvency figures are forecast to show that the level of bankruptcies has risen in recent months.

The Bank's vote against a back-to-back rise also comes amid turmoil in the financial markets as the FTSE 100 has fallen sharply in recent weeks.

But inflation, measured by the Consumer Prices Index, has been above the Government's 2% target for more than a year now and, at 2.4% in June, has not been easing back as quickly as some expected from a 3.1% peak in March.

David Page, UK economist at Investec, said the hold vote was "entirely in line with expectations", but said the outlook for the economy is still unclear.

"We believe that the next few months will show clearer signs of economic slowdown and that should mean that 5.75% is the peak in the cycle," he said.

"But there remains a risk that the economy does not slow and risks of interest rates rising to 6% would abound until year end."

Global Insight's chief economist Howard Archer is predicting rates will rise to 6% in October, but he believes this will be the top of the cycle and rates will start to come down again.

Copyright © PA Business 2007