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£50Bn QE rise could reduce loan costs and aid borrowers

The Bank of England’s monetary policy committee has voted to increase its programme of quantitative easing by £50bn.

It marks the second time in four months that the committee has increased the size of its QE programme following its decision in October to boost the programme by £50bn to £275bn. The BoE has pumped £325bn into the economy since it started its QE programme in March 2009.

The committee held bank rate at its historic low of 0.5 per cent for the 35th consecutive month.

The MPC says: “In the light of the Bank of England’s most recent economic projections, the committee judged that the weak near-term growth outlook and associated downward pressure from economic slack meant that, without further monetary stimulus, it was more likely than not that inflation would undershoot the 2 per cent target in the medium term.”

Mortgage Advice Bureau head of lending Brian Murphy says: “This latest round of QE should reduce borrowing costs and, with rates again held at 0.5 per cent, it could end up providing a boost to mortgage borrowers.

“If the recent increase in the number of 95 per cent loan-to-value deals starts to be taken up by first-time buyers, this should mean a positive outcome for the housing market.”

Capital Economics chief UK economist Vicky Redwood believes the total programme could reach £500bn.

She says: “The consensus view is that the monetary policy committee has now either finished with QE or will do just £25bn more in May, taking the total to £350bn. However, we think that QE will end up much bigger than this, at more like £500bn.”


Kames targets derivatives and property shares for Aegon fund

Kames Capital is planning to introduce derivatives and property shares to its £968m Aegon UK property fund to increase its liquidity. The fund currently holds around 10 per cent in cash and head of unit-linked property funds Sarah Cockburn says she wants to increase liquid assets to up to 20 per cent of the fund […]


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