Bank of England hold interest rates

Bank of England hold interest rates

Interest rates in Britain remain frozen at an all-time low of 0.5%, after the Bank of England decided against the first cut in more than seven years today. 

The Bank was expected to implement a rate reduction to help invigorate growth in an economy that was already slowing ahead of the UK's decision to leave the European Union. But its nine-member monetary policy committee decided this morning that a cut to 0.25% was not necessary at this stage, despite the latest figures showing that the UK economy cooled at the end of the second quarter.

There is now every chance that rates will be cut in August. But for now mortgage borrowing costs will remain more or less the same, especially those with tracker mortgage deals which will automatically fall in line with the drop in interest rates.

Landlords with fixed rate mortgages would not have benefitted from the cut until their deal expires.

However, even if there is a cut in interest rates next month, it will not necessarily be passed on in full by mortgage providers, as David Whittaker, managing director of Mortgages for Business, pointed out last week.

He said: "They [lenders] may even be keen to sustain current rates, or increase pricing in order to regain recent months' lost margins."

Nevertheless, there remains a very strong core of stable low loan to value lending to property investors, including landlords, which is unlikely to contribute to instability, according to Whittaker.

"The current regulatory regime adds to this strength," he added.

The MPC's decision to hold the Bank Rate at 0.5% whilst it waits for the longer term impacts of the EU Referendum result to become clearer has been welcomed by Private Finance.

Simon Checkley, managing director of Private Finance, said: "We fully support today's decision by the MPC to hold the Bank Rate at 0.5% whilst it waits for the longer term impacts of the EU Referendum result to become clearer.

"We anticipate a further review in August once the new economic forecasts are published where we would expect the committee to cut rates by as much as 50bp, achieving a zero percent interest rate, which would be in line with Mark Carney's most recent comments about the need for  the implementation of monetary easing over the summer." 

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