MPC meeting marks sixth anniversary of 0.5% Bank Rate

The Bank of England’s Monetary Policy Committee at its meeting today voted to maintain Bank Rate at 0.5%, marking the 6th anniversary of Bank of England interest rates remaining at historic lows.

Related topics:  Finance News
Rozi Jones
5th March 2015
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The Committee also voted to maintain the stock of purchased assets financed by the issuance of central bank reserves at £375 billion.

The minutes of the meeting will be published on Wednesday 18 March.

Paul Whitlock, Director of Savings, Charter Savings Bank, said:

“Since the publication of the last MPC minutes, rumours have grown that policy makers are poised to increase interest rates later this year. As expected, this rise hasn’t materialised today so consumers face a 72nd consecutive month with a historically low 0.50% base. Clearly this is not good news for savers.

Stephen Smith, Director, Legal & General Mortgage Club and Housing commented:  

“Today marks the 6th anniversary of the Bank of England base rate being at 0.5%. The UK went through an almost unprecedented period of economic uncertainty post the 2007 financial crash. This saw a deliberate policy adopted by the Monetary Policy Committee and the Bank of England in 2009 to keep base rate low. Consequently borrowers were allowed breathing space at a time when many feared an increased squeeze on household incomes could push the country further into the mire.  

“Another important factor has been the sensible progressive attitude adopted by lenders when it comes to forbearance and dealing with arrears. This has meant repossessions have stayed surprisingly low especially when compared to the previous economic downturn and housing market crash we saw in the 1990s.

“The low base rate has also created opportunities for savvier borrowers to secure mortgage deals at unprecedented low rates especially when you consider around the time of the previous crisis in the early 1990s base rate bounced around between 6% and 13%. However, rock bottom rates cannot last forever.

“Speculation remains rife as to when base rate will rise but two things are almost certain. Firstly, they can only really go one way, and that is up. Secondly, many lenders have already started to price in an interest rate rise ahead of time. Borrowers should act now to tie themselves into better deals or risk missing the boat when rates do begin to creep upwards.”

Barry Naisbitt, Chief Economist, Santander UK, said:

"The Monetary Policy Committee’s decision to hold Bank Rate today was, once again, not a surprise. The decision to hold rates last month was unanimous and in advance of this month’s meeting it seemed unlikely that the economic news and data over the past month would have been strong enough to support a change in view for the majority of MPC members.  

"The latest indicators of economic activity have continued to show steady growth, with the PMI output indicators positive in January and February and the unemployment rate has now fallen to 5.7%. The effect of falling oil prices is being seen in CPI inflation, which was at a low of 0.3% in January and could fall further in the coming months. This current very low inflation backdrop should provide scope for the MPC to continue to hold rates at their current level."

John Goodall, CEO of peer-to-peer lender Landbay, said:
 
“As 2015 ushers in yet another year of poor rates of return, the Bank of England’s interest rate policy is waging a war against anyone doing the responsible thing with their money. Not a single saver will be celebrating this disastrous anniversary. Rock bottom interest rates might have played a role in a broader macro-economic recovery plan, but they are now quite clearly the villain for anyone who might have thought the value of their money would be safe in a bank.
 
“Over the last six years the value of many people’s savings will have actually declined substantially because bank saving rates have been so low.  This has led some people to take the plunge and choose to make their money work harder by putting some of their savings into investments that offer higher returns in exchange for small amount of risk. The fact that some savers are willing to be proactive in managing their savings and investments is at least one positive to take from six years of abnormally low interest rates.
 
“The explosive growth of peer-to-peer finance is partly a response to consumers’ needs to make their money generate some income in a low interest rate environment.
 
“The past six years have created a double edged sword in the savings market. Yes, consumers are now far more aware of their options, but sadly many are still losing out. For example, if you had £10,000 to invest six years ago on a 0.5% rate, today you would now have £10,303 before tax. Yet a simple step away from the total safety of high street savings accounts could have seen that amount rise to £12,948 through a 4.4% Landbay rate, with the smallest possible risk to investment capital.
 
“There is already talk of a 7th anniversary for the 0.5% rate.  We expect to see more people turning their back on banks and making their first step towards alternative finance in that time.”

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