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BoE holds base rate at 0.5% and pushes ahead with quantitative easing

The Bank of England has frozen the base rate at 0.5 per cent and is pushing ahead with its £125bn quantitative easing programme which it expects to complete within a month.

The base rate has been at this historic low since it was first slashed to 0.5 per cent in March.

The Bank has so far purchased £105bn of assets as part of its £125bn quantitative easing programme.

The Monetary Policy Committee will review the scale of the programme again at its August meeting, alongside its latest inflation projections.It has the ability to call upon a further £25bn after the alloted £125bn has been spent at the end of this month, but as yet there is no indication whether the Bank will call on this.

John Charcol senior technical manager Ray Boulger says the hold in the base rate and the subsequent ‘wait and see’ policy over quantitative easing will do little to ease problems in the mortgage market.

He says: “Over the last month spreads on five-year fixed rates over the cost of funds have increased by about 1 per cent. This is not a sign of a healthy market.

“Activity in the property market is historically still very low but mortgage lenders have struggled to satisfy even the small increase in demand resulting from the recent modest increase in purchase activity.

“Fixed rates were initially increased a month ago to reflect an increase in swap rates but have since not only not fallen back in line with swap rates but have risen further as lenders respond to increased demand by pushing rates up even more to deter business.”


Prime movers

The first half of this year has seen capital values in the UK commercial property market continue to fall, although the rate of decline is slowing.


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. Billions spent on quantative easing has gone into the pockets of the underserving
    If the BoE really wanted to kick start the economy they should have spent far less on quantataive easing and placed money within reach of those would would actually go out and spend it. These fiscal devices have simply helped the banks to boost their balance sheets, precious little has filtered down to the ordinary Joe in terms of mortgages and loans. Small businesses are struggling to get anything from their banks. The UK now own a controlling interest in all of the lenders that matter, ring fence those billions and tell them: a) they have to lend it to people by Christmas, b) to give people confidence offer every loan with complimentary Unemployment Protection Insurance. Its our money so lets control what happens to it by allowing the people who rely on the health of the economy to keep a job, decide how they will spend it.

  2. Mortgage Rates
    If the so called Mortgage Market is suppose to be regulated by the FSA then it should not only concerntrate on the levels of lending but the rates charged. The banks and building societies have taken this opportunity to fleece the borrowers by not passing on the rate cuts. The rates offered by these financial institutions should have a cap over the base, thus allowing the borrowers to benefit from lower rates.

  3. Andy Cartwright 9th July 2009 at 5:35 pm

    Quantative Easing
    Assuming there are roughly 26 million adults inthe Uk why does the Bank of England give each one £4806 with the one condition, they must go out and spend it.

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