Money News

Bank holds rate at 0.5% for 26th consecutive month

By Martin Fagan - news@consumerchoices.co.uk

The Monetary Policy Committee has voted to maintain rates at 0.5%, but borrowers and savers penalised, says experts.

The Bank of England's Monetary Policy Committee today voted to keep the official Bank Rate at 0.5% for the 26th consecutive month.

The last movement in the Base Rate was a reduction of half a percentage point to 0.5% on 5 March 2009.

The historically low base rate has worked to the advantage of some consumers, says the independent financial research company, Defaqto, which compared the average highest savings and borrowing rates currently available with those available just after the base-rate was originally cut in March 2009.

According to Defaqto, average savings rates are now higher, with the greatest increases seen on longer term fixed rate accounts. Interest rates for low Loan-to-Value (LTV) mortgages have dropped slightly, but rates for unsecured loans have increased.

However, for some variable rate and shorter term fixed-rate savings accounts, Defqto said best buy savings rates had actually fallen.

“Uncertainty around when - and by how much - the base-rate will rise makes it difficult for people to know which type of mortgage to opt for,” said David Black, banking analyst at Defaqto.

“However, average rates for many fixed and base rate tracker mortgages are more favourable now than two years ago.”

But mortgage lenders are not playing fair by customers, said leading mortgage broker John Charcol, who is urging potential borrowers to go on a “buyers' strike” until lenders cut rates sufficiently to reflect the changed mood in the market.

Moreover, despite an historically low base rate for over two years, credit card rates have rocketed in the first months of this year, with increases of up to 2%, according to new research from Moneyfacts.co.uk.

The latest increases mean that the average interest rate charged on credit cards now stands at 19.1%, the highest level in 13 years.