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Bank keeps base rate at 0.5%

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The Bank of England is keeping the base rate at its historically low level of 0.5%, but how long can it stay this low?

The Bank of England’s Monetary Policy Committee voted today to maintain the base rate at its current level of 0.5%. This is the third month in a row that the base rate has been left unchanged, following several dramatic cuts from its peak of 5% in October.

No new measures to stimulate the economy were introduced, but the bank said it would continue with its £125billion programme of asset purchases, which is expected to take another two months to complete.

Ray Boulger, mortgage expert at John Charcol (www.charcol.co.uk) said that it is unclear how long the base rate will stay at 0.5% but said that “one can be certain of which way it will move when it does change.”

He advised borrowers to look at fixing their mortgages, and said that “a fixed rate for at least five years will be needed to protect borrowers from the next upward interest rate cycle.”

He said that those who prefer tracker mortgages should look for one with a little or no early repayment charge (ERC), or alternatively choose a tracker with a droplock option (currently only offered by Nationwide) which allows borrowers to switch onto one of the lender’s fixed rate mortgages without incurring an ERC.

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