Interest rates have been held at 0.5%, which have now been at this level for 9 months, since March, which coincidentally was the bottom of the stockmarket dip in the current recession.

For those with debt this is of course continued welcome news – but now really is the time to make those overpayments to reduce your debt. Never has the impact of interest been so modest of your total debt. The news is less welcome for those reliant upon cash deposit savings or approaching retirement and possibly considering buying an annuity. The city seems to be of the mind that interest rates are likely to remain at this level for a further 12 months with very little change. If this forecast becomes reality, 2010 should be the year that you reduce debt and seek alternatives to cash to improve income.

Politically, we have an election to come in 2010 and I imagine that if there is a change of Government, as many expect, some of the detail of the hard facts of the current Government spending will be published. Depending on who and what you believe, this will create two possible outcomes. Panic (at the numbers), or relief (that they are not as bad as feared). How the markets interpret this remains to be seen, but my own view is that caution should be exercised.

Here’s one for the statisticians – only 12 months ago the Bank base rate was 2.0% some 400% higher than it currently is at present. Our media loves this sort of mathematical frightener – imagine a 400% increase in interest rates now as a headline…. Still only 2.0% which is frankly “as cheap as chips”!

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