MSE News: Base rate held at 0.5%

Former_MSE_Natasha

This is the discussion thread for the following MSE News Story:

"The Bank of England today announced it is holding the base rate at its 0.5% historic low for the 20th consecutive month ..."

Read the full story:
Base rate held at 0.5%

drc

Wow, what a surprise !

angelizz

I was listening to the radio yesterday and a financial analyst was saying he expected rates to remain at 0.5% until at the least end of 2011. Not such good news for savers, good news for mortgage holders with flexible rates though.

78mjt

angelizz wrote: »

I was listening to the radio yesterday and a financial analyst was saying he expected rates to remain at 0.5% until at the least end of 2011. Not such good news for savers, good news for mortgage holders with flexible rates though.

According to the Daily Telegraph the other day over 1/3 of people would not be able to afford their mortgages if rates went up by 2 percentage points. Kind of makes you wonder how they afforded to get a house in the first place...

Mr_Thrifty

It's about time questions were asked in the House of Commons as to why the Bank of England's Monetary Policy Committee hasn't increased interest rates whilst inflation has been significantly over target. To answer that it would increase unemployment or limit economic growth is not valid. The MPC has one role and one role ONLY and that is to control inflation.

guitarman001

It's obvious - the UK is dangerously dependent on the price of housing. That's why the banks are in such trouble - that's why rates are low - to stop repossessions. Look at Ireland/US.

House prices are WAY too high compared to the trend line and the government don't want them to crash - they want them to stagnate for years instead, allow people to pay more of their mortgages off.

In the meantime, savers who may be trying to save up for a home of their own, are being royally shafted.

Primrose

I wouldn't like to be young again and saving for a house deposit these days. It must feel like trying to reach the top of an escalator that is moving downwards.
One can only hope that all those who have low mortgage payments are seizing the opportunity to overpay like crazy while the going is good. However, I suppose for the sake of the economy, the government wants them to be spending for the wider good.

chattychappy

Mr_Thrifty wrote: »

It's about time questions were asked in the House of Commons as to why the Bank of England's Monetary Policy Committee hasn't increased interest rates whilst inflation has been significantly over target. To answer that it would increase unemployment or limit economic growth is not valid. The MPC has one role and one role ONLY and that is to control inflation.

Yes. Savers - including those who saved for their old age are hit twice - by low interest rates and inflation. Keeping rates this low is an artificial subsidy to those who borrowed too much to buy a house.

The MPC should raise interest rates to control inflation - as they are supposed to do.

LSEdwards

Whilst I agree that rates should now start to rise to keep inflation down, the objectives of the MPC are not solely to hit the CPI target.

From their website:
"The Bank’s monetary policy objective is to deliver price stability – low inflation – and, subject to that, to support the Government’s economic objectives including those for growth and employment."

Unfortunately, they have failed to bring inflation within the CPI target for many months now....

Joe_Bloggs

Inflation has not risen because there is too much money chasing too few goods and services. it has risen because the value of the pound has plummeted. This puts up the cost of imported materials. This makes essential foreign imports more expensive hence price increases in certain areas. Also the export market becomes more lucrative than the domestic market. This may lead to domestic shortages as you can make more by selling the same stuff in overseas markets.

Inflation has not risen because the economy is too successful/active for the short term but rather that the economy is failing and desperate measures required a currency devaluation. This won't work if all countries tried to adopt the same strategy.

I welcome any criticisms of my viewpoint.

J_B. (Born Ignorant, still clueless )

Pincher

People who live on interest have to learn cash is only king when you buy things. Saving money purely as cash is a long term loser. You have to invest in something that gives genuine return.