MPC votes 8-1 to hold base rate again
The Bank’s Monetary Policy Committee has voted 8-1 to hold the base rate at 0.5% – with Ian McCafferty once again voting against his peers.
The Minutes revealed that McCafferty felt inflation could overshoot the 2% target “in the medium term” should the base rate stay at 0.5% for much longer.
The market is in an uncertain mood, with a stock market crash in China and falling oil prices. Last week Chancellor George Osborne spoke of a “dangerous cocktail of new threats” before Royal Bank of Scotland economists warned of a “cataclysmic year” on Tuesday.
The MPC also voted to maintain the quantitative easing programme at £375bn.
Jeremy Duncombe, director of Legal & General Mortgage Club, said: “Borrowers will likely greet today’s decision by the Bank of England with apathy, but must not believe this low interest rate environment will last forever.
“Earlier this month, George Osborne warned mortgage holders must be prepared for a UK interest rise in 2016, following the hike in US rates last month.
“Although such a rise was unlikely in January, it’s crucial that borrowers on an SVR or those at the end of their current agreement look to secure a more beneficial rate by remortgaging now, before lenders price-in the inevitable rise.
“Banks will start to include any changes in the base rate in their calculations well ahead of a decision by the Monetary Policy Committee.”
Calum Bennie, savings expert at Scottish Friendly, said: “Yet again the prospect of a UK interest rate rise remains illusory.
“While this will come as little surprise given the traumatic economic start to the year for the UK and global markets, it still makes sense for mortgage payers to plan for an eventual increase as this will inevitably lead to higher monthly repayments.
“However, falling oil prices seem set to continue and will drive inflation lower postponing any plans to push rates up.”