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Monetary Policy Committee freezes base rate

Monetary Policy Committee freezes base rate

Category: Economy

Updated: 04/06/2009
First Published: 04/06/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
The Bank of England's Monetary Policy Committee (MPC) has voted to maintain the base rate of interest at 0.5 per cent for the third consecutive month.

It was also announced that the Bank's quantitative easing programme, which was increased by £50 billion last month to £125 billion, will continue and is likely to take another two months to complete.

The decision was one that was predicted, said Ray Boulger, of John Charcol: "Today's decision by the MPC to leave bank rate and the quantitative easing programme unchanged was widely expected but next month the Committee will have to consider whether to utilise the final £25 billion the Chancellor has authorised for quantitative easing."

Mr Boulger went on to question the asset purchase scheme's programme effect on the house market, commenting: "Despite the Bank of England having used about £75 billion of the funds it has agreed to commit under its quantitative easing programme, it is hard to see any visible impact of this so far in terms of any real increase in mortgage availability."

The base rate of interest is currently at the lowest ever level, although it was set at five per cent as recently as October. The rate has been good news for homeowners on a tracker mortgage, who have seen their interest repayments all but disappear.

Savers have not nearly as much reason to cheer, however, as they have seen the returns on their money dry up significantly.

Ben Thompson, director of mortgages at Legal & General, said the approach seems to be the right course of action at the moment. "A number of fixed rates may well have bottomed out now, suggesting that the markets have made their minds up about which way rates are headed next," he added.

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