When will interest rates rise? That's the question on the lips of millions of Britons.

So, to help out the 1.5m readers that come every week to the site I run - DMGT's thisismoney.co.uk - we developed a page (which we actually started in 2007) that focuses on the future of the UK bank rate.

It is now the most popular page on the site most days.

So what will happen next?

To first explain the basics, the Bank of England's Monetary Policy Committee (MPC) meets for a two-day meeting each month, ending usually on the first Thursday of the month.

The balancing act it faces is to keep inflation below 2% and above 1% over a two-year horizon, as measured by the Consumer Prices Index (CPI).

When the banking collapse happened in the autumn of 2008, it became quickly apparent to the MPC that the economy would be clobbered as a result - it was, and a deep recession followed.

To try and cushion the blow - and to stop inflation falling below 1% as a result - its reaction was to rapidly slash rates from 5% down to 0.5%, by March 2009.

Lower borrowing costs should boost business investment and stoke consumer demand. The bank rate has remained there since then.

But CPI inflation has been running above 3% for a number of months, so why isn't the MPC ordering rate hikes? Well, most committee members believe that inflation is partly a result of rises in global commodity prices and that eventually that inflationary pressure will disappear.

They argue that the underlying economy remains weak - especially with tax rises and government spending cuts ahead - and low rates will be needed to avoid falling prices. It's deflation that's the threat not inflation, so the argument goes.

While all this helps those with mortgages, it has been punishing for those reliant on their savings for income. They have hunted for any signs of rising rates, facing the dilemma of whether to tie up money in five-year fixed rate accounts at 4%. If rates were to take off, that rate would very quickly look poor.

They recently latched on to a spike in inflation, revealed in figures in May, and warnings from prominent bodies on rates. The Bank of International Settlements, an international organisation for central banks, said (29 June) that it wants ultra-low rates to end in the UK. While the Organisation of Economic Cooperation and Development, meanwhile, has recommended the UK raise rates 'no later than the last quarter of 2010', and to 3.5% by the end of 2011 (26 May).

Hopes were further boosted when it was revealed that the British economy is bouncing back far more than had been forecast - an early official estimate put economic growth in GDP between April and June at 1.1% rather than the 0.6% that had been forecast.

But rate rise hopes were short-lived. The big fear is that with banking debts shifted to become government debt, another crisis may be round the corner. Even if it's not, then the austerity measures and tax rises will put a huge dent in consumer confidence for the next few years and that it would be madness to do so with such a scenario lying ahead.

That's why the well respected ITEM Club, an economic forecasting group, recently warned rates could remain at 0.5% until the end of 2013. That's a view that's rapidly gathering backers.

A recent poll of economists was more 'dovish' than at any time before, suggesting rates would only start to rise in early summer next year and only reach 1.5% by the end of 2011.

Rates and mortgages

In terms of personal finances, mortgage borrowers who believe rates will stay low should look at tracker mortgages, which are considerably cheaper than fixed-rate deals at the moment. But it's essential that they run the scenario of rapid increases. Could you afford the repayments if the bank rate increased from 0.5% to, say 5%, in the next year? Forecasters say that's very unlikely, but it's not impossible.

Savers who expect low rates until 2013 should consider a three or fixed-rate savings deals, bearing in mind they will feel aggrieved if rates are hiked. There are also other income options covered here.

For more on interest rate predictions and a rate rise calculator, go to thisismoney's calculator.

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