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The Bank of England decided to keep interest rates at 0.5% this morning, with the institution鈥檚 monetary policy committee also electing not to increase the 拢200bn programme of quantitative easing.

The decision means it is now 10 months since the last interest rate change, when rates were reduced by 0.5% to their current level last March.

The decision comes amidst further signs of recovery in the housing market, with Halifax today reporting a 1% increase in house prices in December. This means prices are now 1.1% higher than a year ago, the first year on year rise recorded for almost two years, since March 2008.

Ian Baker, group managing director for housebuilding at Galliford Try Homes, welcomed the continuing freeze on interest rates but said more was needed from banks.

He said: "Lenders still need to look more favourably at lending to homeowners, many of whom will be heading back to the market after delaying a move last year.

"The current trickle of lending will not sustain the pent-up demand for mortgages and lenders still need to relax some of the unnecessarily high borrowing criteria set last year.鈥�

Halifax鈥檚 index shows prices reached a low in April last year, but have since recovered 9.4% since then, making the average house price 拢169,042. The bank said the significant cuts in interest rates following the financial collapse of 2008 had helped to stimulate housing demand.

David Bexon, managing director of SmartNewHomes.com, said the Bank of England was right to keep interest rates low.

He said: "The latest Halifax house price index is good news for homemovers and will help soothe market jitters. Improved affordability especially for first-time buyers 鈥� the lifeblood of the new homes market - is also welcomed. However, the government must continue to address the supply of available land for development to address the now considerable shortfall in new housing starts.鈥�