No surprise at Base Rate freeze

The Bank of England's decision to hold Base Rate at 0.5% for the 14th consecutive month came as no surprise.

The news will be welcomed by mortgage borrowers currently on Base Rate tracker deals and standard variable rates, but will have no impact on fixed rate borrowers.

According to the Council of Mortgage Lenders (CML), 38% of borrowers are currently on fixed rates and 62% paying a variable rate.

The CML, which had predicted no change, also pointed out that overall mortgage rates have not been directly impacted by Base Rate changes over the last year, but that the average rate charged reduced slightly, from 3.83% in March 2009 to 3.66% in March 2010.

Jonathan Cornell, communications director of First Action Finance, said:

"The hung parliament is a contributing factor to the decision to hold interest rates. But even if we had a government of whatever colour on Friday morning, we would still have the same announcement.

"The MPC is standalone, so not under any political pressure. The rate is on hold because the economy is still fundamentally weak. There are a number of economies around the world that have increased rates to reign in housing booms, but I can't see any increase in rates in the UK in the next six months."

Stuart Law, chief executive of Assetz added:

“Early indicators are that problems at home are being overshadowed by current chaos in the eurozone but this will need to be carefully monitored. If prices in one area, such as bonds, are forced up, mortgage rates could follow.”