But he evidently accepts that there is no real domestic argument for raising interest rates

But he evidently accepts that there is no real domestic argument for raising interest rates. Property prices, so often the engine of inflation in the past, are deeply depressed, earnings are not rising excessively, consumer spending and output are slowing down again, and any inflationary pressures are all external.He deserves to be congratulated for his ability to see the difference. Thanks then to Kenneth Clarke for deciding not to add the pain of dearer mortgages to the suffering of the electorate.He could easily have been forgiven for raising interest rates to create an artificial slowdown in the economy, as an excuse to revive it later with the tax cuts that alone can redeem the Government's fortunes.He must have been under heavy pressure to raise rates anyway to support the pound. There can be very few people in this group, who aspire to be financially comfortable, who are not threatened by one or more of those gnawing uncertainties.In the circumstances, the outcome of the local elections will surprise no one who actually lives in Middle England, wherever that may be. Then there is the increasing need to provide for private health insurance and falling property values, not ot mention the real prospect of any inherited money being required to provide care for aged parents. So it is hardly surprising that the middle classes took their revenge last week on the Government they hold responsible for a feel-bad factor that ministers appear neither to recognise nor care about.Any one of those worries would be enough to make the middle classes nervous and irritable, and the definition nowadays includes a good 70 per cent of the voting population. Delaying the inevitable would do the housing market little good in the long run, and home owners and the housing market will hope that pressure for higher interest rates will continue to recede..

THE MIDDLE classes may statistically be better off than they were in the 1970s, but they can be excused for not appreciating the fact. They must deal with increasing job insecurity, widespread suspicion of the sales staff who have been peddling endowment mortgages and personal pensions of unquantifiable value, and the escalating costs of private education to give children a halfway decent start in life. There were also fears that the Chancellor might raise rates now in order to justify tax cuts later.The markets, however, remain divided over whether the Chancellor can or will continue to hold interest rates down. An immediate rise in rates might have looked like a politically cynical decision - to delay the rise in advance of the election to minimise the political backlash and then to kick the electorate in the teeth at a time when the voters are clearly looking to the Government for a better deal.The pressure for a rise in rates has always come from the financial markets, worried over the possibility of rising inflation. House prices across the board are still static, although there are signs of a weak recovery in London and south-east England, where prices were most depressed in the recession The housebuilders would also have been hard hit.

Completions were higher in the first quarter compared with a year ago, but applications for new starts were well down.Any further rise in mortgage rates would come hard on the heels of the rise in mortgage rates in February - and the reduction in tax relief on mortgages last month - and further depress demand for mortgages while lenders are competing hard for remortgages to bulk out what little new business there is.Savers could expect some increase in rates, which are currently unattractive, but an extra half per cent would certainly make life more difficult for other investments, including unit trusts, investment trusts and guaranteed income bonds.The Chancellor has taken a calculated risk in not raising rates in the immediate aftermath of the local elections. A further rise in mortgage rates and savings rates would have been inevitable if base rates had gone up again, even though demand for mortgages is relatively weak. The effect on the housing market and consumer confidence would inevitably be severe. Lenders last raised rates in February, only to see the Bank of England raise base rates a further half point to 6.75 per cent a few days later. THE Chancellor's decision to defy the pressure from the currency and bond markets and from the Governor of the Bank of England for a rise in base rates is good news for the housing market.