The Bank of England’s monetary policy committee has voted unanimously to keep the base rate at 0.75 per cent.
The rate has stayed at this level since it was raised from 0.50 per cent in early August last year.
The meeting minutes show that the committee believes that the softer growth seen both domestically and internationally is “likely to prove only temporary,” and that CPI inflation is expected to settle a “little above 2 per cent in the medium term”. Currently it sits at 2.1 per cent.
The minutes go on to say that if the economy were to develop as expected, monetary policy would be tightened “at a gradual pace and to a limited extent.”
In terms of the housing market, the MPC expects the UK House Price Index to be broadly flat in the first quarter of this year, in line with indicators provided by Nationwide and Rightmove. Furthermore, the committee expects housing investment to fall within the same time frame.
Santander UK chief economist Frances Haque says: “The decision to hold rates was widely expected by both the market and commentators, given the continued uncertainty around Brexit.
“Although inflation remains slightly above the 2 per cent level and real wage growth continues its current trend, the MPC looks to have remained cautious in its approach, wanting to wait until the outcome on Brexit is known before raising rates further.
“Assuming a Brexit deal can be reached before 29 March, the MPC will now likely wait until after this point before hiking rates again.”
LMS chief executive Nick Chadbourne says that his firm’s data shows a trend in remortgagers taking out five-year fixes, but that “a stay in rate rises shouldn’t be taken for granted… increasingly consumers are getting wise to this.
“Our research from January reveals that 60 per cent of borrowers expect interest rates to increase within the next year.”