Interest rates kept on hold at 0.5%

The Bank of England’s Monetary Policy Committee has kept the base rate on hold at 0.5%.

The Bank has kept interest rates on hold at 0.5% since March 2009.

The Committee also voted to maintain the size of the Asset Purchase Programme at £200bn.

Minutes from the January MPC meeting showed the Bank of England was edging a step closer to increasing interest rates.

Two members of the MPC voted for a rate rise at January’s meeting. Andrew Sentance and Martin Weale both opted for a 0.25% increase in interest rates to 0.75%.

The minutes from today’s meeting will be published on February 23.

Ben Thompson, managing director 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 transactions from the peak levels of 2006, and at that time the housing market was in complete meltdown.

“Since then transaction levels have recovered well however remain around half the levels of 2006. The recovery in this sector in underway but remains fragile compared to the more robust and perhaps confident recent past.

“Although for the MPC the monthly meetings are becoming tougher, we remain unsurprised that they have stuck at 0.5% for the time being.”

Richard Barker, mortgage manager at Norwich & Peterborough, says the decision to leave the base rate unchanged at 0.50% for the 23rd consecutive month does not come as a huge surprise.

He says: “Whilst concerns around inflation persist, the economy still remains in a relatively fragile state and the members of the MPC are clearly worried that any increase could snuff out the economic recovery.

“While the government’s austerity measures, due to be implemented over the coming months, could help mitigate some of the inflation risk, the MPC members seem to have taken this into consideration and are holding back for the moment. This news will be welcomed by the many borrowers benefiting from historically low variable rates.”