BoE holds base rate at 0.5% yet again!

Published ¤ 09/12/2010 13:25:49

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The Bank of England's Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%.

The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion.

Simon Gammon, head of Knight Frank Finance, commented, "At the November meeting, the vast majority of the MPC's members were still of the opinion that rates should stay on hold, and that nothing has really changed since then to suggest a rate rise is imminent.
"The pressures to raise rates are still there, but the MPC's concerns around such a move, which include people's ability to afford the levels of debt they currently have, are outweighing the positives. For this reason, we do not expect a rise until at least 2011, and probably the second half of the year."
Jonathan Samuels, Drawbridge Finance, commented, "The monthly meeting of the MPC has become something of a non-event. Ongoing uncertainty around the strength of the recovery, and real fear of a premature rate hike hitting business and consumers hard, is likely to keep rates on hold until at least the summer of 2011.
"Yes, the economy is stronger than it was a year ago but could it remain standing without the prop of a 0.5% base rate? For the property market, rates at their current level will act as a glass floor on prices.

"As seen with the November Halifax house price data, showing a decline of 0.1%, prices appear to have entered a kind of limbo. There are too many conflicting variables to send them in one direction or the other.
"The key time for the property market will come when rates eventually rise. It's crucial that when rates do rise they go up at a pace that will not give the economy - and consumers - the bends."
Paul Skinner of Odiham based mortgage broker, PKS, commented, "This is good news for homeowners with a mortgage, particularly so close to Christmas - a time when many families take on more debt than any other time. It is essential that, when rates rise, they do so gradulally, as it may come as a bit of a shock to many mortgage holders, especially those that have been enjoying very low standard variable rates for the last few months.
"Of course, at PKS we can offer truly independent advice, and we have numerous schemes available to help mitigate against the cost of rising interest rates. These include 'switch to fix' mortgages, whereby one can take a low tracker rate with the option to switch to a fixed rate without incurring penalties, and also interest rate insurance, available even if the mortgage has current penalties, or if the borrower has credit problems."
If you are concerned about the risk of rising interest rates, call PKS today.

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