Interest rates held at 0.5 per cent Go compare with our comparison table

Interest rates held at 0.5 per cent

11 June 2010 / by Lois Avery

Interest rates have been held at a record low of 0.5 per cent for the 15th month running.

The Bank of England yesterday decided to maintain their hold on the low rate market by sticking with the lowest base rate Britain has ever seen.

The news came as no surprise to investors who were expecting the bank to hold rates while the new Government settles in and gets ready to announce their economic plans in the forthcoming Emergency Budget.

It is likely that the Bank of England’s Monetary policy Committee, who decide the base rate, will keep interest low while they see what affect the government’s public spending cut backs will have.

Some experts thought that the rising inflation would force the Bank to intervene and raise rates.

Duncan Higgins, senior analyst at Caxton FX said: "With spending cuts and tax rises just around the corner we are unlikely to see a change in interest rates this year. The fear is that the measures the government is due to implement could destabilise the recovery and raising rates prematurely would exacerbate the problem.

"The Bank has stubbornly stuck to its line that inflation will fall below the 2.0% target in the medium term, despite growing dissent. Increasingly, factors do point to inflation subsiding. Troubles in the eurozone are showing little sign of easing and falling demand from the continent will put downward pressure on prices. This will be compounded by weaker domestic demand as the full impact of tax increases and spending cuts is felt.”

The rate freeze is likely to unsettle savers, who are struggling to get a good deal for their money in many of the traditional savings accounts and cash ISAs on the market.

But there are other options for those keen to see a return on their savings. Instead of settling for a low rate instant access accounts savers who are able to lock their money away are being encouraged to invest in fixed rate bonds in order to get the best deals.

Some fixed rate bonds offer rates as high as 4.5 per cent and the best deals generally come with longer investment periods of between 3 and 5 years.

To compare fixed rate bond deals click here »

© Fair Investment Company Ltd

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