Base rate 'won't change this year' Go compare with our comparison table

Base rate 'won't change this year'

11 May 2010 / by Rachel Mason

David Doulton, director at Fair Investment Company comments on the Bank of England's decision to keep the base rate at 0.5%

"This is not a surprise. The economic recovery is still fragile, and this, combined with the election uncertainty and the Greek economic crisis, meant the Bank of England had no choice but to the leave the base rate at 0.5%.

"Some economists have been predicting that the MPC could make a substantial rise in interest rates by the end of the year to try and counter inflation - which rose to 3.4% in March, well above the BoE's 2% target - but I just don't think this will happen. Inflation of 3.4% is a concern, but raising the base rate would have a very negative impact. Rates most likely won't change this year. And probably not in 2011 either.

"For borrowers of course, a base rate of 0.5% is good news, and for savers who also have mortgages it is worth looking at offset mortgages if you have low yielding savings that you can offset against higher fixed rate mortgage debt. 

"For savers still wanting to get some returns on their cash, now could be the time to start looking at fixed rate deals, and at fixing for at least 3 years because rates are actually coming down on savings, not up, and will probably continue to do so for the foreseeable future.

"Savers should particularly review any money in existing instant access savings accounts and instant access cash ISA accounts as the gap between rates on instant access and fixed rate deals can be very significant."