Bank Base Rate held at 0.5%

The Monetary Policy Committee of the Bank of England has voted to maintain Base Rate at 0.5% for the ninth consecutive month.

The decision to maintain the rate at its current level was widely anticipated.

Most economists now predict that the rate will remain unchanged well into 2010. The Chancellor announced in the Pre-Budget Report this week that he expects inflation to fall below its 2% target within two years, indicating that Bank Base Rate will not have to increase substantially in that time. And George Osborne has also stated on more than one occasion recently that he expects interest rates to stay low for some time.

The MPC also voted today not to extend the quantitative easing (QE) programme beyond the existing level of £200bn.

Ray Boulger, senior technical manager at mortgage broker John Charcol, said:

“This is the ninth month on the trot that Bank Rate has been left unchanged, the longest period of an unchanged Rate since the 12 months at 4.5% ending in August 2006. However, it is rather misleading to quote this simple statistic as several increases in the QE programme have been announced during these nine months.

"In the current environment, with the MPC having two tools at its disposal to influence monetary policy, it would be fairer to look at the length of time without a change in either Bank Rate or the QE programme, but this is probably not how the history will be recorded.

“Over the last month we have seen a continuation of the impact of a modest increase in competition from mortgage lenders.

“However, what is more important for the health of the property market than modest reductions in rates available for borrowers only requiring a relatively low loan to value (LTV) is the fact that there has been a significant increase in the number of mortgages available up to 80%, 85% and even 90% LTV. Furthermore the additional competition in this sector of the market has pushed some rates and some arrangement fees lower."