Base rate remains at 4.5%

The Bank of England left base rate unchanged last week at 4.5%.

The previous change in base rate was a reduction of 0.25 percentage points to 4.5% on August 4.

Michael Coogan, director-general of the Council of Mortgage Lenders, says: “The Bank’s decision to leave the rate at 4.5% was no surprise. Housing transactions, mortgage approvals and gross mortgage lending have strengthened in recent months. The market should remain well supported to the end of the year, with house prices remaining broadly stable.

“Recent evidence on household spending does not yet point to the expected strengthening. With inflation above the 2% target there is concern inflation expectations might be revised upward, creating a policy problem for the future. The market is discounting a cut in rates to 4.25% early next year. This is in line with our view that rates will fall once it is clear inflation has peaked.”

Mehrdad Yousefi, head of intermediary mortgages at Alliance & Leicester, says: “The MPC’s decision was widely expected. Recent economic data has highlighted a lower economic growth rate than forecast in the March Budget due to higher oil prices and lower consumer confidence. The market is still seeing the positive effects of the rate cut in August with a great deal of activity in the housing and mortgage markets.”

And Ray Boulger, senior technical manager at John Charcol, says: “Economists’ views on future house prices have been hugely divergent over the past five years and they still are.But there was near unanimity that the base rate would be unchanged this month.

“Most economic statistics released over the past month point to the next move being down, and soon.”