HOMEOWNERS were given a boost when the Bank of England froze the cost of borrowing for the fifth consecutive month.

The decision to keep interest rates on hold at 4.75% came as little surprise to experts, many of whom now believe them to have peaked.

This view was backed by Swindon-based Nationwide, whose spokeswoman Rosemary Callender, said: "We don't expect a lot of change but rates could be five per cent by the end of this year. This is good news for those with mortgages.

"Savers should shop around for the best deals we offer five per cent on our e-saving account."

A cooler house market and one of the worst Christmas on the high street are likely to have convinced the Bank's Monetary Policy Committeeto hold firm. These factors, coupled with weak economic growth, have increased the chances of inflation coming down.

Government's 2% target in two years' time.

Further negative news emerged with an unexpected 0.1% drop in manufacturing output between October and November.

John Butler, economist at HSBC, said: "The decision is as expected. There is a lot of uncertainty over the housing market and consumer spending over the Christmas period and until the Bank gets more clarification, rates are likely to remain on hold in the coming months."

Many analysts now believe rates have peaked after five hikes since November 2003. The focus is now on whether there will be a reduction - an option that the MPC started discussing at its meeting in December.