Bank keeps base rate at 0.5%

The Bank of England’s Monetary Policy Committee has decided to keep the base rate on hold at 0.5%, while maintaining its quantitative easing programme at £200bn.

The base rate has now been at the record low of 0.5% since March 2009.

The latest lending data from the Bank shows that mortgage approvals sank to a nine-month low in February, going from 48,099 in January to 47,094.

Remortgage approvals showed a slight increase rising to 27,297 in February from 24,458 in January.

House prices rose slightly last month by 1.1% according to the Halifax house price index.

But commentators believe that housing market activity is likely to remain subdued ahead of the general election on May 6.

Stuart Law, chief executive of Assetz, says: “It is no great surprise that the MPC has once again kept the base interest rate at its record low of 0.5% this close to the election.

“Even post May 6, base rates are likely to remain low for a considerable period of time in order to allow the economy to start to grow again at a significant rate.”

Ray Boulger, senior technical manager at John Charcol, says: “In view of the significant difference in the fiscal policies of the two main parties, and the impact these are likely to have on the markets, the future trend of bank rate is very entwined with the political future of the UK.

“Therefore any lack of clarity on the of the make up of the new parliament would make early discussions at the MPC meeting somewhat problematical.

“Anyone considering a new mortgage before the election should not ignore the political risk, not only because of the impact the result could have on interest rates but, perhaps even more importantly, also because of the impact the result will have on the UK economy.”