Bank keeps rates on hold

Robyn Hall

October 10, 2013

The central bank made no change to its £375bn of asset purchases.

Barry Naisbitt, chief Economist at Santander UK, said: “After the major change in the approach to monetary policy announced in August, the Monetary Policy Committee was highly unlikely to do anything other than hold Bank Rate again this month.

“The main focus of attention has been on the string of positive news on the UK economy – the survey indicators of activity strengthened further in August and remained positive in September.

“This suggests that GDP growth will be strong again in the third quarter, although the figures for manufacturing output in August were weaker than anticipated.

“For the MPC in the months ahead the key will be whether relatively strong GDP results in a reduction in the unemployment rate and if inflation continues to edge down.”

Ben Thompson, managing director Legal & General Mortgage Club, added: “No doubt the discussions are becoming more and more interesting as the economic recovery continues, albeit with the odd stutter along the way. In reality there remains a lot of slack in the economy, inflation is very much in line, and notwithstanding the fact that conditions are much improved, we are still far from any state of normal.

“The Bank will not want to start any type of unwinding or tightening until the recovery is fully baked in, therefore no change this month was no surprise. This base rate stability combined with the second phase of Help to Buy does mean that confidence is continuing to grow. Our latest Mortgage Mood research shows that 31% of consumers feel more confident about buying a home today than they did 12 months ago.

“Having said that, affordability is still a key issue. To ensure that homeownership is an achievable goal for would-be borrowers, house price rises have to stay broadly in line with inflation.

“Increasing the availability of housing stock is the best way to meet the huge demand.

“If more homes were built in the right areas, properties would become more affordable and we would see a stable and sustainable market which is good news for the UK economy as a whole.

“The widespread construction of appropriate homes needs to remain firmly on the political and industry agenda.”

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