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Base rate kept at 0.5% - When will it rise?
Thursday, 7 January 2009 Writes Hazel Cottrell hazel.cottrell@consumerchoices.co.ukSavers and borrowers are questioning when they’ll see interest rates rise again as the Bank of England base rate is kept at 0.5% for the 10th month running.
The Monetary Policy Committee (MPC) voted today to keep the base rate at its record low of 0.5%.
| We expect rates to stay at 0.5% until the beginning of 2011 at least. |
This is the tenth month in a row that the base rate has been kept at this level, after being cut to 0.5% in March 2009.
Experts are divided on when the base rate will rise again, because the effects of rising oil prices, an increase in VAT and improvements in the economy are as yet unknown.
Ben Thompson, director of mortgages at investment and insurance company Legal & General, said: “The first interest rate rise might not be until next year. However, a year is a long time in the housing industry and inflationary pressures could change the landscape quite dramatically.”
Mark Bolsom, head of the UK trading desk at foreign exchange company Travelex, believes that increasing the base rate, and thus hiking up mortgage repayments, would be disastrous for UK consumers.
He said: “Economists that are predicting a rate rise in March are far too bullish. Talk of a recovery is, as yet, far too premature. We expect rates to stay at 0.5% until the beginning of 2011 at least.”
The MPC has also decided to continue with its £200billion quantitative easing programme - the process whereby the bank buys government and corporate debt in an attempt to stimulate the economy. This is expected to take another month to complete.