Interest rates held at 0.5%

9 December 2010 | By Natalie Thomas

The Bank’s Monetary Policy Committee have now kept interest rates on hold for 21 months.

The Committee also voted to maintain quantitative easing at £200bn.

Ben Thompson, director of mortgages at Legal & General, says: “The Bank could easily just have decided to hibernate for the winter and make the simple decision that BBR does not need to change.

“In amongst the bad weather and other adverse news, there has been some great manufacturing results and some positive noise in terms of Christmas spending, however nothing like enough to provoke any discussions about rate changes.

“The Bank’s Christmas present to us all this year is not to raise the cost of borrowing, and it probably won’t in 2011 at all.”

Jonathan Samuels, CEO of Drawbridge Finance, says the monthly meeting of the MPC has become something of a non-event.

He says: “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.”

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