The Base rate remains at 0.5%

The Bank of Englandís Monetary Policy Committee met today to discuss the base rate and, rather predictably, decided to keep it at 0.5%.

The base rate has remained at an all time historic low since March 2009. Many experts do not expect interest rates to rise until late 2012 or even 2013.

Savers have reportedly missed out on £43billion since the interest rate was cut, yet borrowers have paid £51 billion less on their loans.

Consumers have been borrowing less since the first half of the year, not taking advantage of the low interest rate. Borrowing levels fell by £1.7 billion in the second quarter of the year, compared to the first quarter total of £2.1 billion.

Karen Barrett, Chief Executive of unbiased.co.uk, said; ìSo far this year we have seen a contraction in debt repayments and a slow down in the growth of savings levels compared to previous quarters. It seems that rising inflation and living costs are taking their toll on consumers, leaving them with less disposable income to save.î

Savers

Savers in general are now facing a difficult dilemma. They could either move to risk-free accounts that offer little or no return, or invest their savings into riskier, yet potentially more lucrative, products.

Those who rely on savings for an income, such as pensioners, are suffering the most in the present situation. They will have seen their savings diminish as a direct result of low interest rates.

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Borrowers

Mortgage borrowers are the biggest winners from this low base rate as they are paying the lowest mortgage rates in living memory. Some of those with tracker mortgages have seen their repayment rate fall below 1%.

However, the low rate could not have been foreseen and now mortgage holders find themselves with the option of switching from a fixed rate mortgage or a variable rate linked to the low base rate. The second option could be more beneficial, yet it is difficult to predict how long this low interest rate will last for.

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