Bank Rate maintained at 0.5%

The official Bank Rate paid on commercial bank reserves has been maintained at 0.5% by The Bank of England’s Monetary Policy Committee. This means that the Bank Rate has now been at 0.5% for a whole year, having been lowered from 1.0% in March 2009.

The committee have also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion. This follows a decision in November last year to increase the size of the programme by £25 billion.

Commenting on the news, Robert Sinclair, Director, Association of Mortgage Intermediaries, said:

“With the general election now imminent the MPC has, unsurprisingly, maintained its position. Economic recovery remains weak and we wait to see if further stimulus via quantitative easing is required. With inflation hopefully peaking and house prices reining back there is little evidence to support an increase to the interest rate. An extended period of low interest rates is now looking more and more likely, with an extension to quantitative easing a better bet than a withdrawal of the recent monetary stimulus.

“Funding for mortgages remains restricted and this will continue to limit what is available to consumers over the next few months.”

David Black, Banking Specialist at Defacto believes that the Bank Rate remaining at 0.50% leaves the nation’s savers between a rock and a hard place:

“With inflation at 3.50% and tax being levied on gross returns it’s getting really hard for savers. Once again those hardest hit will be those who rely on savings interest to supplement their day-to-day living which will be the case for many pensioners,” he said.

Information on the Asset Purchase Facility can be found on the the Bank of England website.