The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion.
Mortgages now thousands of pounds cheaper than when the base rate first fell to 0.50%
David Black, Defaqto's Insight Analyst for Banking, said:
"The current economic climate has made it extremely difficult for people to borrow, particularly first time buyers.
"However, the good news for those that manage to secure a mortgage is that mortgage rates are significantly more favourable now than they were two or so years ago - and, in monetary terms, people borrowing now will pay far less over the initial term of the mortgage than those that took out a similar product in March 2009.
"With a five year fixed rate mortgages available as low as 3.29%, a ten year fixed at 3.99% and a lifetime base rate tracker at bank base rate plus 1.99%, there is considerable choice for those with an undemanding Loan-to-Value requirement.
"However, it is important to remember that the base rate can only go one way - but the question is when, by how much and how quickly.
"This is the great unknown and once the base rate starts to increase it will inevitably force mortgages rates upwards."
Bank Rate held, fixed rate mortgages keep tumbling
Ray Boulger of John Charcol, comments:
"With new evidence of problems in global economy emerging almost every day and EU politicians appearing to not be prepared to even accept the scale of the Euro problem, let alone take sufficient and robust action to address it, the economic outlook has deteriorated rapidly over the last month.
"Markets have reacted by pushing to record lows the yield on some bonds issued by countries regarded as safe havens, such as the UK, allowing mortgage lenders to make some sizable cuts to the rates on offer on fixed rate mortgages.
"After a brief respite the Eurozone countries deemed at risk of default have seen yields on their bonds rise again, with 1 year Greek bonds now yielding an eye watering 96% and its 2 year bonds around 50%!
"The scale of the contagion when Greece is allowed to default is difficult to judge but there are now so many problem countries in the Eurozone that a chain reaction, with Portugal next in line, and several other candidate countries in the firing line, seems very probable.
"With Eurozone politicians refusing, or unable, to take the necessary action to deal with this crisis the markets will dictate how the situation develops, and it won't take prisoners.
"With such impending turmoil in our major trading partner area the impact on an already weak UK economy is likely to push UK GDP back into negative territory and Bank Rate looks set to remain at 0.5% for at least 2 years.
"Further quantitative easing will no doubt have been discussed more seriously at this month's MPC meeting but with further trauma to come from the Eurozone the MPC needs to keep some ammunition in its armoury to deal with the fallout.
"One specific mortgage which offers the best of both worlds and will almost certainly work out cheaper than even the best 5 year fixed rate mortgage is the hybrid "Golden Hello" mortgage from Accord, which last week had a rate reduction.
"For LTVs up to 75% this 5 year deal charges Bank Rate + 1.69% to 31/10/13, i.e. a starting rate of 2.19%, followed by a fixed rate of 3.39% for the next 3 years. Thus a highly competitive tracker rate for the first two years is followed by a guaranteed highly competitive fixed rate for 3 years.
"Should Bank Rate remains at 0.5% until October 2013 the average rate on this mortgage would be 2.91% and for its average rate not to be lower than any 5 year fixed rate mortgage currently available Bank Rate would have to AVERAGE at least 2.75% over the next 2 years.
"The mortgage is also available for LTVs up to 85% with rates a little over 1% higher, also making it cheaper than any current 5 year fixed rate up to 85% LTV."
Half of Brits would like to see base rate increase
Kevin Mountford, head of banking at MoneySupermarket said:
"With the Bank of England Base Rate sitting at a record low for the past two and a half years it is clear that there have been winners and losers, with savers generally feeling the combined impact of low rates and high inflation. Some borrowers have benefited, particularly those mortgage borrowers with large deposits, or those who want to borrower larger amounts on personal loans.
"Not surprisingly our own site poll clearly shows that savers would like to see Base Rate rise in the near future as many are struggling to generate good returns on their savings pots.
"However, despite low interest rates we are seeing competition in the savings market, especially among the smaller players who are looking to attract new savers onto their books. The best rates are currently paying over six times the level of Base Rate, and there is no guarantee this will continue when rates eventually do rise.
"Those who are sitting on their savings waiting for Base Rate to rise are missing out on the benefits today. When Base Rate does rise, it will only be gradual so it is unlikely we will see any major shift from providers in the short-term, so savers should make sure their money is working hard for them today.
"Many existing mortgage customers have benefited from low interest rates and would like to co
