Bank of England maintains interest rates at 0.5%
The Bank of England's Monetary Policy Committee today voted to maintain UK interest rates at 0.5%. The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion.
Ray Boulger of leading independent mortgage adviser John Charcol commented: "The MPC will no doubt have been made aware of the inflation forecasts to be published on Wednesday in the Quarterly Inflation Report, but despite last week's wholesale price index showing a worrying upward trend there are still enough concerns about the health of global economy, as witnessed by the massive weekend bail out for the Euro, to suggest it is still much too early to start tightening monetary policy. As the talks between the Conservatives and Liberal Democrats appear to be making good progress the markets seem prepared to wait for the outcome, particularly with the Euro bail out taking centre stage today.
What does this mean for mortgages?
"Most of Friday's initial rise in gilt yields was reversed by the close of play and despite an increase in yields today it is worth noting the yield on German Bunds has increased significantly more than the yield on gilts. Furthermore, because of the strength of the gilt market in the run up to the election, with our market being seen as a safe haven from potential Euro contagion, swap rates are still close to all time lows. Mortgage lenders generally did not pass in the fall in gilt yields and swap rates and so despite the modest rise in yields since the election, fixed rate mortgage pricing is not under any immediate pressure. The chickens coming home to roost with the Euro experiment at the same time as our election have helped save the day for our mortgage rates!
"Once the basis of our new government has been resolved it will be easier to firm up on the best strategy for choosing a mortgage but the Eurozone sovereign debt scare is a timely reminder that the global economy is far from being out of the woods. The size of the bail out for the Eurozone countries indicates the potential seriousness of the problem if the EU had not taken action to defend the Euro and as things stand at the moment trackers still appear to offer better value than fixed rates. However, for those who prefer the certainty offered by fixed rates 5 year fixes are now again available at the sort of levels seen just after Bank Rate fell to 0.5% in March last year."