The Bank of England’s Monetary Policy Committee has voted to keep base rate at 0.5%  this month, marking the one-year anniversary of record low interest rates. The MPC has also decided not to extend its quantitative easing programme beyond the £200bn it has already spent on buying up assets to boost the economy.

Minutes published by the Committee last month show that the Bank may look to spend more on quantitative easing in the future, but wants to judge how effective its purchases have been before it commits more money to the programme.

Figures from the Office for National Statistics last week revealed that the UK economy had grown between October and December by more than was originally thought.

UK gross domestic product grew by 0.3% in Q4 according to the latest revision, up from the sluggish 0.1% growth initially estimated by the ONS. The quantitative easing programme was not expected to be boosted further this month as the Bank looks to curb rising inflation.

Inflation hit 3.5% in January, the highest level since November 2008 and up from 2.9% in December.

Bank of England

Ben Thompson, director of mortgages at Legal & General, says: “Political forces will significantly influence the overall economic picture this year – we’ve got an election coming up and inevitable tax hikes to tackle the gargantuan government debt. “This will hit the pockets of British families, tempering their spending and allowing the MPC to maintain rates at a low level for some time yet.” He adds: “The lurking threat is inflation though. “The Bank expects inflation to remain high for several months but only temporarily so. “There are some signs that inflationary pressure may build up over the course of this year and next year.”

Ray Boulger, senior technical manager at John Charcol, says: “The economic arguments continue to suggest a tracker mortgage is the right choice for most borrowers because the economy is in such a mess that low interest rates are here for some time yet. “Yet the election cannot be ignored.  The markets have been expecting a Conservative majority and what once looked like a foregone conclusion is now not so certain.  This may have a negative effect on fixed rate pricing.”

As ever, I hope this information is useful to you.

Bank of England Base Rate Update

You may be aware that the Bank of England today decided to maintain the Base Rate at 0.5% for the 11th consecutive month. Mortgage rates have also remained stable over the initial 5 weeks of the year with a slight reduction in Fixed Rates, as lenders try and temp clients to fix while rates remain low.

We have seen an increase in higher Loan to Value products with 80% and 85% lending options competitively priced. Further information can be found here – http://news.bbc.co.uk/1/hi/business/8496830.stm