Base Rate maintained at 0.5% for 11th month

The Bank of England's Base Rate of interest has been held at its record low of 0.5% for at least another month.

The decision, made by the Bank’s Monetary Policy Committee, was widely anticipated.

Opinion is divided on when the Base Rate is likely to increase. Some economists believe that rising inflation will force the Bank to increase the costs of borrowing to contain surging prices, sooner rather than later.

Others believe that, with the economy remaining very fragile, it is essential that the cost of borrowing is kept low for at least the rest of the year so as not to undermine the shaky recovery.

In terms of mortgages, borrowers on tracker deals which are priced at a margin above Base Rate will be relieved by the news.

Tens of thousands of borrowers on lenders’ other variable rate deals have been warned that their interest rates will increase in the coming weeks, despite the Base Rate remaining static for 11 months.

However, many lenders have been cutting the interest rates they charge on certain deals since the beginning of the year.

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

“We are now around four months into the trend of mortgage rates gently falling, with lenders generally cutting just some of their fixed and tracker rates, rather than most or all their products, at any one time.

“We have also seen a significant increase in the number of deals available, particularly at the higher loan to values (LTVs), although… those borrowers who need more than 75% LTV will continue to pay a big premium compared to those with deposit or equity of at least 25%.”