Bank holds interest rates

10/12/2009

Policymakers at the Bank of England announced today (December 10th) that they will keep interest rates at their present level of 0.5 per cent for another month.

The Bank has now held the rate at the same level - an all-time low in the institution's 300-year history - since March 2009.

Interest rates were slashed in late 2008 and early 2009 as a response to the credit crunch and recession.

This is because the Bank lends money to commercial mortgage and loans providers at the base rate, meaning that a lower base rate makes this borrowing cheaper.

Therefore, it was hoped that the move would lower mortgage rates, providing a stimulus for the economy.

A programme of quantitative easing - the modern-day equivalent of printing money - was also introduced by the Bank in March in order to increase the flow of cash around the economy and ease lending conditions further.

The Bank policymakers have agreed to keep the size of the scheme at £200 billion this month.

Commenting on the move, EuroDebt director Kevin Still said: "Whilst this is good news for homeowners with financial problems going into 2010, the real question is whether this will be sustained through 2010 as predicted. With the VAT rise and National Insurance going up for most households, there is further pressure on disposable income.

"We have seen rises in interest rates for credit card borrowing and many people are affected by pay freezes or reduced working hours. A rise in mortgage rates may upset a very delicate balance and move potentially hundreds of thousands of households into an unmanageable debt position. It is important to prioritise your expenditure and to seek professional money or debt advice early."

Tags; Current UK Economy, Young Family Finances, Retirement Money Problems, Credit Card Lifestyle, Recent Graduate Debt,

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