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MPC votes to hold base rate at 0.5 per cent

The Bank of England’s Monetary Policy Committee has voted to hold base rates at 0.5 per cent for the ninth consecutive month.

It also voted to continue with its programme of quantitative easing which totals £200bn.

The MPC says it expects the QE programme to take another two months to complete and says the scale of the programme will be kept under review.

John Charcol senior technical manager Ray Boulger says: “This is the 9th month on the trot that Bank Rate has been left unchanged, the longest period of an unchanged rate since the 12 months at 4.5 per cent ending in August 2006. However, it is rather misleading to quote this simple statistic as several increases in the QE programme have been announced during these 9 months.

“In the current environment, with the MPC having 2 tools at its disposal to influence monetary policy, it would be fairer to look at the length of time without a change in either Bank Rate or the QE programme, but this is probably not how the history will be recorded.
 
“Over the last month we have seen a continuation of the impact of a modest increase in competition from mortgage lenders and this has been particularly evident in the 2 year fixed rate market. Although a large majority of our clients are currently choosing trackers, and in many cases lifetime trackers, most of those choosing a fixed rate have opted for a 2 year fix, which explains why that is the sector of the fixed rate market where competition is strongest.”

Legal & General’s director of mortgages Ben Thompson said: “The remortgage market is actually showing early signs of warming up, but it won’t really get going until the bank base rate is increased.

“When this happens, borrowers that are able to move around are going to start doing so quickly, creating havoc with lenders’ back books. We think that ‘locking the back door’ is something that lenders should be thinking about far in advance and ought to be preparing their retention strategies already.

“We would encourage lenders to work with brokers to ensure a cost-effective solution for all parties. We would also encourage brokers to start reviewing their books, identifying people on standard variable rates without tie-ins and making lists of prospects to call when the time is right.”

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