Base rate held at 0.5% for June

3 June 2009

The Bank of England has voted to keep the official rate of interest in the UK at 0.5% for a third month.

In April, the central bank’s Monetary Policy Committee (MPC) ended six months of rate cuts, leaving the base rate an all-time low of just half a percentage point.

It then froze the base rate in May, and has now decided to stick with this policy for a further month.

The move is good news for mortgage borrowers with interest rates that track the Bank of England base rate, as it means they will not see their monthly repayments increase in June.

However, experts say that complacency about low rates could be dangerous. "The fact is, half a percentage point is far from the norm - it is likely to increase to 5% or 6% over the long term but could rise beyond this if the rate of inflation increases sharply down the line," says David Hollingworth, spokesman for London & Country mortgage broker.

"Anyone who has seen their monthly repayments fall since October should seriously consider overpaying on their mortgage to try and pay off some of their debt."

The historically-low base rate is, however, less positive for savers. Banks and building societies have passed on the cuts, with headline rates on fixed, instant access and cash ISA accounts falling dramatically since October.


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