Interest rates held at 0.5pc

Nia Williams

March 7, 2013

The decision means interest rates have stood at the record-low level for four years.

The Bank also announced that it will keep its quantitative easing programme on hold despite pressure from some quarters to revisit it.

Commenting, Ben Thompson, MD Legal & General Mortgage Club, said: “We are seeing the early signs of a recovery but it needs to be nurtured. Things are a little brighter and certainly better than a few years ago but we are some way from being ‘normal.’

“Base rate has stayed flat yet again at 0.5%, we are approaching half a trillion of Quantitative Easing in the system equating to £12,613.52 per head for every UK worker and 40 or so banks and building societies are being heavily supported via the Funding for Lending Scheme.

“Over the last 6 years alone significant money has been spent on first propping up and then stimulating the UK economy – in fact more pounds have been spent on keeping the UK banking system and economy going through this period, than total seconds have passed since the Bank was first established in 1694.

“With that in mind it feels important to not provide too much ‘medicine’ in the shape of Quantitative Easing. However, of equal importance is for the Bank to give the tentative recovery every chance.

“We very much need this to continue and strengthen, and low borrowing costs for yet another month will do no harm whatsoever.”

Sean Oldfield, chief executive officer, Castle Trust, believes competitive products within the sector is crucial to improving the market in addition to low rates. He said: “Even after four years of a record low base rate, mortgage lending is still at the same level as it was in 2009 and well below earlier levels.

“Increased competition in the mortgage market driven by a combination of Funding for Lending and the resurgence of building societies is very welcome but the development of innovative mortgage products is absolutely crucial to sustain a competitive market.

“This will reinforce the improvement in lending conditions and provide a wider range of mortgage options for homebuyers.”

Interestingly the markets reacted favourably to teh move. Glenn Uniacke, head of options at the foreign exchange specialists Moneycorp, commented: “The Pound immediately jumped by nearly a cent against the Dollar as the markets breathed a sigh of relief that the expected QE did not happen.

“The outgoing Governor has become increasingly outspoken in his calls for a loosening of monetary policy so the markets had both predicted, and priced in, an extra burst of money printing.

“Had the QE taps been opened further, the Pound could easily have pushed on to a three-year low against the Dollar.

“The news that the money presses will be allowed to gather dust for another month will halt Sterling’s slide for now, but conflicting data about the state of the economy mean the jury is still out on whether the UK has returned to growth in the first quarter. The Pound’s prospects still hang in the balance.”

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