MPC maintains low interest rates

The Bank of England has held inter-est rates at 0.5% for the 23rd month in a row.

Last week the Monetary Policy Committee voted to keep the base rate on hold and maintain the size of the Asset Purchase Programme at £200bn.

Minutes from the January MPC meeting showed the Bank was edging a step closer to raising the interest rate, with two members voting for a 0.25% increase to 0.75%.

Ben Thompson, managing direc-tor of Legal & General Mortgage Club, says: “Base rate has now been flat since March 2009. In terms of the housing market that quarter saw a drop of 74% in housing trans-actions from the peak levels of 2006, and at that time the housing market was in complete meltdown.

“Since then transaction levels have recovered well but at around half the levels of 2006. The recovery in this sector is under way but rem-ains fragile compared to the more robust and perhaps confident recent past.”

Richard Barker, mortgage man-ager at Norwich & Peterborough, says the government’s austerity measures, due to be implemented over the coming months, could help mitigate some of the inflation risk, MPC members seem to have taken this into consideration and are holding back for the moment.

He says: “This news will be welcomed by the many borrowers benefiting from historically low variable rates.”