Bank of England holds steady on quantitative easing

Thursday, October 8, 2009, 13:48
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The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves, known as the ‘base rate’ at 0.5%.

The Committee also voted to continue with its programme of asset purchases totalling £175 billion financed by the issuance of central bank reserves.

The Committee expects the announced programme to take another month to complete, with the scale of the programme kept under review.

Ray Boulger of UK mortgage broker John Charcol said:

“Today’s no change decision may be a bit of a non event but there is at last some action back in the mortgage market. September saw the usual seasonal upturn and over the last few days we have at last started to see some real competition from lenders, albeit primarily for lower LTV business. Woolwich, Northern Rock, Abbey, Alliance & Leicester, Principality and Coventry have all announced cheaper deals this week which is good news for borrowers.”

“In line with my forecast last month house prices as measured by Nationwide for September are unchanged on a year on year basis. When October’s figures are announced I confidently expect the year on year figure to be comfortably into positive territory. I now expect this index to end 2009 with a rise of around 7½% but for the rate of increase to slow down in the New Year. However, if house prices were to continue to increase next year at the current rate there would be a serious risk of an earlier than expected increase in Bank Rate. ”

Robert Sinclair, Director of Association of Mortgage Intermediaries also expects difficult decisions for next MPC meeting:

“The Bank of England’s decision to maintain both rates and the quantitative easing programme was no surprise. It will however pile the pressure on next month’s meeting when there will be real expectations for a clear direction from the Committee.”

“The next round of data on inflation, GDP, Balance of Payments and unemployment will form an uneasy back-drop. It will not be a meeting for the faint-hearted.”