Meanwhile, three-month LIBOR is now 2.07%. There was an almost unanimous verdict from the MPC to reduce the base rate from 1.5% to 1% a few weeks ago, the fifth cut since October, with votes going eight to one in favour.
David Blanchflower, the MPC member who for a long time has been calling on the MPC to cut rates, voted to slash the base rate to 0.5%.
All nine MPC members voted to seek government approval for measures aimed at raising the supply of money in the economy.
This process, called quantitative easing, is to help increase the level of funds in the banking system, thereby making it easier for commercial banks to boost lending.
This process has become necessary as we have seen that base rate cuts alone have been singularly unsuccessful at increasing the supply of funding.
Inflation fell much less than anyone was expecting. The Consumer Price Index fell from 3.1% to 3% but most analysts were expecting it to fall to about 2.7%.
Meanwhile, the Retail Price Index fell to 0.1% from December’s 0.9%. The headline RPI rate of 0.1% is at its lowest since 1960.
In hindsight it seems amazing that the MPC held off cutting the base rate for so much of last year and the Bank of England now believes that the CPI will fall to 0.5% later this year and will undershoot the RPI.
Abbey and Alliance & Leicester seem to have adopted HBOS syndrome with both choosing to reprice on Thursday afternoon at the same time.
I guess once the government has worked its magic on the banking industry we will be left with one big state-owned bank with 35 to 40 mortgages brands, all of which can reprice at the same time.
Last week was pretty busy in terms of rate changes and announcements. Abbey and A&L both managed to reprice twice.
There was certainly a good number of lenders repricing. While it was hard to keep track it does remind you that there are more lenders in the market than you think.
I do wish Abbey would tell us what the new rates were going to be rather than making us wait for a day or so to see them.
Yes it’s nice to know that rates are going down by 10 to 20 basis points but until we see what the new fee is we can’t do anything with them.
Lenders are good at telling us when rates go down but they tend to keep quiet when the fees go up.
Northern Rock launched a five-year fixed rate at 4.69% for loans up to 65% LTV with a £995 fee. Taking into account the massive flexibility of NR’s rates this does look decent value but I think five-year fixed rates have further to go before borrowers will be enticed from their ultra-low SVR deals.
Woolwich slashed its fixed rates by up to 0.5%, though this was mainly down to the fact that the rates were a little on the high side.
Scottish Widows Bank has launched a pair of good value tracker rates for professionals.
The loans are available up to 85% LTV with a maximum loan of £500,000.
There is a version with a £999 fee for a two-year tracker at base plus 2.69% and a no-fee version at 3.19% over base.
Nationwide has cut fixed rates and launched some trackers. The new trackers do look great value. The lowest is a 3.58% two-year deal for loans up to 60% LTV with a £995 fee. The equivalent two-year fixed rate just squeezes under 4% at 3.98%.
The 75% LTV two-year tracker with £995 fee is 3.78% and the same two-year fixed rate is 4.18%.