Bank of England holds rates

The Bank of Englands Monetary Policy Committee today voted to maintain the official Bank Rate at 5%. The announcement has been widely predicted by economists who cite the increase in inflation as the reason why a reduction was unlikely. Indeed, opinion has been split on whether the MPC should opt for a reduction to stave off recession or a raise to stave of inflation, and it will be interesting to see how members voted when the minutes of the meeting are released on the 23rd July.

Whilst the Bank of England base rate has historically played a leading role in the pricing of mortgage rates, this has been less so in recent months. Whilst is was quite possible for the ideal borrower to obtain a tracker rate on or around the Bank of England base rate this time last year, it is impossible to do so now. The current two year tracker rate from the Abbey at Bank of England base rate plus 0.69% is seen as attractive, even after allowing for the £1,849 arrangement fee. As a result it is limited to those wishing to borrow less than 60% of the value of their property.

With an almost daily dose of bad news from the housing industry, many commentators now think that the time has come for the government to step in with some assistance.

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