Bank holds rates and continues with QE programme
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The Bank of England’s Monetary Policy Committee has decided to keep base rate at 0.5% for the tenth month in a row, while continuing with its £200bn programme of quantitative easing.
Eight lenders have increased their SVRs despite the base rate being left unchanged at 0.5% since March last year, according to figures from Moneyfacts.
As at December 31 the Bank has spent over £190bn on quantitative easing, the process the Bank is employing to buy up assets in the hope that this boosts the money supply.
The MPC says it expects the programme to take another month to complete, and will keep monitoring the scale of the programme.
Ben Thompson, director of mortgages at Legal & General, says monetary policy could stay the same for the rest of 2010.
But he adds: “A year is a long time in the housing industry and inflationary pressures could change the landscape quite dramatically.
“We’ve never seen financial intervention and stimulus on this scale before and we don’t know for sure how it will pan out for borrowers.
“The normal rules don’t necessarily apply and there is a risk that the Bank has already pumped too much fuel into the engine.”
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Readers' comments (5)
Peter Scammell | 7 Jan 2010 1:22 pm
Does anyone know who are the eight lenders that have increased their SVRs are? Great that all the experts are offering their (somewhat guarded) opinions - but where were they in late 2008??????
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Adrian Warwick | 7 Jan 2010 2:06 pm
Peter, have a look above right at the link entitled "SVR increases gain momentum". The short report lists the culprits. May be a selling point for clients looking to do nothing and revert onto SVR. I.e. they do so at their own peril.
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Andrew Botte | 7 Jan 2010 4:40 pm
It will be interesting to see what effect a forthcoming election has on BBR.
Is it likely the government will want an increase to appease the over 50's so hard done by on their saving rates for so long?
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Salil Chaudhari | 8 Jan 2010 12:56 pm
I think QE will continue, albeit in smaller chunks of 20-30bn until signs of unfavourable economic conditions begin to show up until inflation is well above 2%, say 5% before interest rates rise. The BBR will be around 2% by Q4 2010.Urgent legislation is required to prevent banks and building societies raising SVR's particularly when BBR is kept the same or reduced.If the government can do this to bank bonuses surely they can do this to the SVR's as this feeds indirectly into the banks' bonuses.
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Peter L. Griffiths | 26 Sep 2010 3:20 pm
Quantitative easing enables the central bank to hand over new notes to the other banks without any fiscal injection into the economy.
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