The UK central bank also kept its quantitative easing programme steady at £375bn at the November meeting. Both decisions were expected by every economist polled by Bloomberg.
RBS commented:
"Although viewed in mid-year as one of the most likely months for the first rate hike, inflation and global growth have weakened since, giving the edge back to BoE doves... Our UK economist expects the BoE to first hike rates in August 2015, raising Bank Rate to 1.5% by the end of 2016.
Last month, two voting members of the Monetary Policy Committee voted for interest rate increases, signalling that a rate rise could be getting closer.
Yesterday, a report from NIESR stated that they 'expect interest rates to begin to rise gradually from the middle of 2015'.
NIESR forecasts interest rates will rise from the current level of 0.5 per cent to 1 per cent by the end of 2015 before rising gradually to to 2.75 per cent by the end of 2019.
Stephen Smith, Director, Legal & General Mortgage Club and Housing, commented on what a rate rise might mean for homeowners.
He said:
“With the Bank of England continuing to hold the base rate, speculation is mounting over when rates will rise. During the period since March 2009, when the base rate hit its current low of 0.5%, many homeowners have not had to worry too much about shopping around for the best deal on their mortgage. However, this period of record low rates is coming to an end and many homeowners could benefit from speaking to adviser about finding the best deal for them.
Over the next two to three years interest rates are likely to hit a ‘new normal’ of around 3% which would mean a significant jump in monthly repayments for many borrowers so it makes sense to find a good deal on your mortgage now.”
The Prime Minister said recently that Britain’s low interest rate is “good news” because it has made owning a home more affordable.
Neil Lovatt, Director at Scottish Friendly, commented:
“The Prime Minister may be happy with today’s announcement following his comments last week, but there will be millions of savers out there that will feel that they are not getting the best rates on their savings because of the fragility of the current political landscape.
“The Eurozone is one of Britain’s biggest trading partners and as such, fears over a fresh crisis on the continent and how that might affect the UK economy is probably a leading consideration in the Bank of England’s decision.
“When interest rates do rise, those with a mortgage should make hay while the sun shines for them and build up a cushion of savings to draw on if their mortgage repayments start to rise.”
