(Newswire.net via — March 8, 2013)The base rate of interest has been held at 0.5 per cent – four years since it dropped to that historic low.
The Bank of England’s decision was widely expected and it is not likely to rise soon.
Savers continue to lose out, but there are signs that the mortgage and remortgage industry is starting to pick-up following years in a slump after the financial crisis.
The low rate is consistently hailed by the government as a way of helping boost the economy as it means borrowing is cheaper.
Indeed, many mortgage-holders are benefiting from the rate because lenders have lower rates than they did before the crash.
Many experts believe the rate will remain at 0.5 per cent until well into 2015.
However, Stephen Gifford, director of economics at the CBI, said mixed economic data would have made this month’s decision “a close call”.
He said: “With only a modest pick-up in growth expected, the possibility of further QE will remain a live issue.”
The Bank of England also announced that it would make no change in its use of quantitative easing.
Sir Mervyn King, the governor of the Bank of England was one of three Monetary Policy Committee members last month who voted to increase QE by £25 billion to £400 billion.
If he stuck to his guns it means he was out-voted by the rest of the committee. However, he is shortly to be replaced by a new governor.
The government and the BoE are trying to find ways of bringing growth to the economy.
This means getting lending going, and the Funding for Lending scheme is one way it is trying to do this.
However, Sir Mervyn said the performance of the FLS had so far been “disappointing”.
There had been little evidence that small businesses were being offered cheaper loans because of it.
Recently the BoE discussed extending the FLS to “non-bank lenders”.
Max Erskine from remortgagenow.co said: “Every time the Bank of England is ablout to make a decision there is speculation that the base rate will rise from 0.5 per cent.
“However, this month marks the fourth year it has remained at the all-time and I can’t see it rising for some time yet.
“While economic growth is almost non existent, we don’t know how much worse things would get in the mortgage industry if the base rate rose.
“Lenders might see it as a reason to further raise their own rates and that might have a much worse effect.”
Max Erksine writes for remortgagenow.co