The Monetary Policy Committee’s (MPC) decision to freeze the Bank base rate at 0.5% continues the recent stability in rates, after six cuts took BBR from 5% last October to its current record low. 

The Committee also voted to continue with its programme of asset purchases financed by the issuance of central bank reserves and to increase its size by £50bn to £175bn.

The world economy remains in recession, though there have been increasing signs that output in the UK’s main export markets is stabilising. Financial market strains have eased and banks’ funding conditions have improved a little, although financial conditions remain fragile. Household and business confidence has picked up, albeit from the very low levels experienced in the wake of the financial crisis last autumn.

Francis Ghiloni, commercial director at Realpricecomparison.com, said that while there was some innovation appearing in mortgage deals available, the cost of mortgages was still excessively high reflecting the lack of competition among lenders.

He continued: “In reality the MPC did not have much choice and should be leaving the base rate on hold for at least the next year barring major changes in the economic outlook. Unemployment is likely to keep rising and will lead to further difficulties in the housing market with the levels of arrears in prime mortgages set to increase.”

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“Inflation is muted and apart from foreign-exchange driven issues is likely to remain so. Despite the historically low base rate mortgage costs are still high.”