MPC Chooses To Hold Base Rate

The Bank of England’s monetary policy committee (MPC) has chosen to maintain the base rate of interest, it has been revealed.

In its monthly meeting, the committee today (August 7th) decided to keep interest rates at five per cent. Such a move means it is the sixth time this year the group has voted for no change in rates, while a decrease of 0.25 percentage points took place in both February and April.

As a result of the committee’s decision it may be possible Britons do not find their finances coming under any additional strain. This is something which could prove to be particularly of benefit during the current climate of financial tension as previous hikes in the base rate - such as the five which took place between August 2006 and July 2007 - have often been a precursor to a rise in monthly mortgage repayments. Furthermore, this month’s decision to keep rates constant may mean that consumers’ ability to handle other spending commitments - in areas such as personal loans, household bills, credit cards and transport costs - does not come under any further pressure.

And although it is possible that the MPC hold may mean people’s monetary difficulties do not worsen, a number of financial experts have stated that this month had given the Bank of England the opportunity to cut the base rate and so take a step to alleviate the spending pressures many consumers face.

Commenting on today’s decision, Legal & General said: “A rate cut cannot come too soon for borrowers and when it does finally happen, it will be an important step towards recovery for the housing market. Industry initiatives to improve liquidity which are currently being considered are also vital to get things moving again. All the time that rates and inflation remain high, borrowers feel the pain.”

A spokesperson from the financial services firm also reported that at present millions of Britons are making use of loans, overdrafts and other means of borrowing “just to make ends meet”. It was stated that over five million people are currently living beyond their means, while the cost of servicing unsecured debts remains high.

Meanwhile, Fairinvestment claimed the decision to hold interest rates at five per cent was “no surprise”. The firm suggested that although people are developing greater difficulties in meeting spending commitments, the MPC must still keep in mind the dangers of inflation which, it stated, is “a serious threat to the UK economy”. It went on to claim that as more Britons are developing problems when it comes to paying their mortgage a base rate reduction “would have been welcomed with open arms by many”.

However, with the base rate staying still for another month those consumers looking for an effective way in which to supplement their spending could find that now is an ideal time to apply for a cheap loan. By taking out such a loan borrowers may be able to meet various financial commitments and fund major purchasing quickly and be left with an affordable rate of monthly repayments. This could be especially advisable for people wanting monetary assistance while their children are off school as a recent study by Abbey Credit Cards showed spending on kids over this year’s summer break will stand at 4.2 billion pounds.

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