Base Rate held at 0.5% for one year

Bank Base Rate has been held at 0.5% for the 12th consecutive month.

The Monetary Policy Committee of the Bank of England voted to maintain the Base Rate at its current level as the economy struggles to make its way out of recession.

The decision will be welcomed by mortgage borrowers on tracker deals, which are linked to the Bank Base Rate, and also by people sitting on the Standard Variable Rates (SVRs) of those lenders who have promised not to increase the rate by more than a given margin over Base Rate.

Mixed economic data released in recent weeks suggest that the road to recovery for the UK may be long and far from smooth. The service sector picked up in February and the Confederation of British Industry reported that retail sales increased significantly last month.

However, Nationwide and Halifax both recorded the first monthly fall in house prices for eight months. The construction and automotive sectors continue to struggle, and fears over unemployment are still rife.

IHS Global Insight economist Howard Archer said rates could be kept on hold for the rest of the year as fears faded that the government rescue package would trigger a bout of inflation.

He added: “We expect the Bank of England to keep interest rates down at 0.5% not only on Thursday but through 2010 given likely persistent concerns about the strength and sustainability of the recovery.

“It is likely that the economy will go through many more twists and turns over the coming months.”