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Record low base rate hits two year milestone

Record low base rate hits two year milestone

Category: Savings

Updated: 10/03/2011
First Published: 10/03/2011

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 It is now over 6 months old so the content may be out of date.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 has decided to keep base rate on hold for another month, making it a full two years that the rate has sat at 0.5%.

Base rate first dropped to the record low in March 2009 in order to help boost the economy.

While the move has meant lower mortgage repayments for homeowners, savers have had to endure low interest rates on their savings accounts.

With inflation running at 4% in January, twice its target level, pressure has been growing for the Monetary Policy Committee (MPC) to sanction a rise in base rate.

At the February meeting of the committee, three members voted to increase rates, while six preferred to maintain the status quo.

As to how the MPC members voted today, the minutes of the meeting will be released later this month.

While savers will no doubt be disappointed by the lack of movement, new research from shows savings rates have steadily begun to rise.

New regulations requiring banks and building societies to hold higher levels of cash deposits and increase the use of in-house funding for mortgages have increased the demand for savers' money.

Providers have therefore been battling it out for consumers' funds, with interest rates on savings accounts rising as a result.

Long term fixed rate bonds have seen the biggest increases in rates, while the rates available on cash ISAs now stand at their highest level for more than two years.

"Increased demand for savers' money has meant that despite no change in bank base rate, savings rates have continued to rise," said Michelle Slade, spokesperson for

"Although savings rates may appear low when compared to previous years, providers are paying higher interest rates on savings accounts than would normally be expected with such a low base rate."

The Bank of England also revealed that the £200 billion programme of quantitative easing will be maintained at its existing level for at least another month.

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