The Bank of England resisted calls from industry for lower borrowing costs, and it held interest rates yesterday at 4 per cent for the 13th month in a row.

Rates have now been kept steady for the longest period for 43 years, despite pressure from industry for a cut to help boost the beleaguered manufacturing sector.

But the bank's nine-strong monetary policy committee has held off lowering the cost of borrowing for fear it would further stoke the housing market.

Dramatic house price rises over the past year - fuelled by the lowest interest rates for nearly 40 years - have sparked fears of price falls and raised concerns from economists that people are digging themselves into a mountain of debt.

Data this week from the Nationwide building society confirmed prices were still rising, with annual house price inflation in November hitting 25.5 per cent, the highest for 13 years.

The Bank of England's decision today had thus been widely expected by the City.

Mr John Butler, economist at HSBC, said: "As expected we are in for a prolonged period of rates on hold as the economy struggles between a buoyant consumer and a stagnating global economy.

"The housing market is the single biggest obstacle to further rate cuts."

However, despite the bank's reluctance to cut rates, economists today said industry should receive a boost from the European Central Bank's (ECB) decision to slice a hefty half point from the cost of borrowing.

The ECB's move - announced 45 minutes after the Bank of England's decision - was made amid increasing fears about growth in the euro zone economies.

It is the first time the ECB has cut its interest rates in 13 months, and brings rates in the euro zone down to 2.75 per cent.

The cut also comes after November's move by the Federal Reserve to slice half a point from rates in America, bringing the cost of borrowing in the US to a four-decade low of 1.25 per cent.

Economists said lower borrowing costs in the euro zone should feed through and eventually benefit the UK economy.

Mr Butler said: "I think the combination of the Bank of England doing nothing and the European Central Bank cutting is the best combination for the UK economy.

"It doesn't further stimulate the housing market but it should boost global demand and provide some relief for UK manufacturing. - (PA)