UK holds interest rates again

The UK has held interest rates for yet another month, meaning it is now over five years since a change to the base rate was made by the Bank of England.

Following a meeting of the Monetary Policy Committee (MPC) yesterday (March 6th), it was revealed that interest rates will remain at 0.5 per cent, a record low for the UK.

Five years ago, the Bank confirmed it was dropping interest rates to 0.5 per cent in a bid to support the economy through the middle of the global financial crash.

Analysts believe a rate rise could come in 2015, but it is likely the base rate will be slowly edged up over a period of several months in order to get it back to a more normal level.

Ray Boulger, of leading independent mortgage adviser John Charcol, stated that it was a "foregone conclusion" that the MPC would hold interest rates yet again this week.

Historical context

He explained the five-year anniversary of the MPC's last change to the base rate provides a "convenient opportunity to put this exceptionally long period of stability into some historical context". Mr Boulger added: "The previous lowest Bank rate was two per cent and although the rate has hit that level several times in its long history there were only two occasions when it remained at this level for more than five years, between May 1932 and July 1939, when it briefly rose to four per cent as war approached, before falling back to two per cent only two months later in September and staying there not only throughout the Second World War but up to October 1951."

The specialist noted that while the chances of the MPC holding the base rate at 0.5 per cent for another seven years is "negligible", it is worth remembering that analysts have been wrong with their predictions in the past as they expected a rise to have been announced long before now.

Record low interest rates are widely believed to have been good for mortgage customers but bad for savers in the last five years.

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