The Bank of England base rates will remain at 0.5 per cent for an undisclosed period, it has been revealed.
Rates have remained static for nearly five years after the Bank said it would not consider raising them until unemployment fell to 7 per cent. However, unemployment levels fell faster than anticipated and stood at 7.4 per cent in October, indicating that the Bank may raise rates before the initially predicted 2016 date.
The base rate has a knock-on effect on mortgage rates as a lower rate encourages lenders to offer more competitive deals. Any change will have an impact if you have a tracker mortgage.
Commenting on the Bank’s decision to keep interest rates at their current leve, Barry Naisbitt, chief economist at Santander said: “Following the major change in the approach to monetary policy announced last August, the Monetary Policy Committee (MPC) was not expected to do anything other than hold Bank Rate again this month.
“However, the decision was made against a background of continued positive economic news. The UK economy is estimated to have grown by 0.8 per cent in the third quarter and the survey indicators of activity point to a strong performance in the final quarter of last year too.
“The unemployment rate has fallen faster than the MPC expected back in August and, at 7.4 per cent in October, is approaching the 7 per cent policy threshold quickly. At the same time, inflation has fallen back and at 2.1 per cent in November is just a whisker away from the 2 per cent target. This will give a degree of comfort to the MPC that it has scope to hold rates at their current level for some while longer. Next month’s Inflation Report and any changes that the MPC may make to its outlook for the economy are likely to be the next areas of focus.”
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