The Bank of England’s Monetary Policy Committee voted on  Monday to maintain the official Bank Rate paid on commercial bank reserves at 0.5%.  Although they usually meet on the first Thurday of the month, this was changed to the 10th May due to the General Election. 

The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion.

The Committee’s latest inflation and output projections will appear in the Inflation Report to be published at 10.30am on Wednesday 12 May 2010.

The minutes of the meeting will be published at 9.30am on Wednesday 19 May.

The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves 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.

After a substantial fall in output, the United Kingdom economy recorded sluggish growth in the final quarter of 2009.  Spending by households appears to have picked up a little, though that may partly reflect temporary factors.  The rate of decline in businesses’ investment spending appears to have eased.  And the world economy continued to recover, raising the demand for UK exports.

The Bank of England (BoE) has maintained interest rates at 0.5% for the eighth consecutive month.

As expected the Bank of England’s Monetary Policy Committee has voted to keep the base rate on hold at 0.5% where it has been since March this year.

Many commentators expect the rate to remain at this level until well into next year, with one even predicting rates will stay at this level for another five years.

The Bank of England also said that it was continuing with it’s £175 billion of quantitative easing, which it expected to take another month to complete.

Nationwide House price index has shown that House prices rose by 0.9% in September, this is the fifth monthly rise in a row.  According to the index price growth is down just –2.7% compared to last year, but down -13.5% since the market peaked in October 2007.

Martin Gahbauer, Nationwide’s Chief Economist, said: “The 3 month on 3 month rate of change, generally a smoother indicator of the near term trend, rose from 3.3% in August to 3.8% in September, the highest level since August 2004.

He added: “At £161,816, the average price of a typical UK property was essentially unchanged from a year earlier, representing the first time since March 2008 that the year-on-year rate of change has not been negative. Over the first nine months of 2009, the seasonally adjusted index of house prices has risen by 4.1%.”

“One reason to remain cautious about the outlook for house prices is that turnover in the market is still well below normal levels. The housing turnover rate – measuring the percentage of the private sector housing stock changing hands on an annualised basis – fell to only 3% at the end of 2008. Although the turnover rate has since recovered to nearly 4%, there is still quite some way to go before turnover reaches the pre-downturn level of between 7% and 8%.

Michael White, chief executive of online mortgage advisers Email Mortgages.com, said: “To talk of an average UK house price is always something of a red herring given the UK is very much a regional housing market – some homeowners, for example, those in the London commuter belt, will have seen their property bounce back strongly since the large falls of last year, while others have only seen a slight house price recovery.  One must expect that the recent house price increases, if they are to be maintained at all, will only be in very small increments and this will be the pattern for the foreseeable future.”

White said “the real issue for the UK housing market continues to be the low level of mortgage lending by the banks; a recent Bank of England Credit Conditions Survey for quarter three outlines what anyone working in the mortgage market has known for some time, that lenders have not increased lending to businesses or individuals as previously promised, instead lending has been cut.  Given the small number of lenders currently active in the market it is therefore unsurprising that many potential house purchases are not going ahead because of the difficulty accessing mortgage finance; a particularly acute problem for first-time buyers.”

The rate which banks lend to one another, the London Inter Bank Offered Rate,  fell again this week to ’0.57%’ and with Bank of England interest rates remaining at ’0.5%’, many industry experts are calling on lenders to drop mortgage rates.

Michelle Slade, a spokesman for Moneyfacts, said:
“Lenders are taking, what appears to be an excessive margin for risk from those homeowners that are struggling the most. Falling house prices has dwindled away the equity in their homes and they are being dealt a further blow by having to pay mortgage rates at similar levels to those available two years ago when bank rate was 5.75 per cent.

“Libor and bank rate are at an all time low, but tracker rates, similar to fixed rates have not fallen in line. The margin taken on trackers has moved to an all time high as lenders are concentrate or repairing their balance sheets rather that helping borrowers.”