Belfast Telegraph

Tuesday 23 September 2014

Interest rates held for 36th month

The Bank of England has kept interest rates at half a per cent

Interest rates have been held at a record low of 0.5% for the 36th month in a row amid evidence that the benefits to borrowers are slipping away.

The Bank of England's Monetary Policy Committee maintained the base rate as some experts predicted it could be held at the same rock-bottom level for another three years - causing great pain for savers.

But lenders have recently started to put up their mortgage costs, including Halifax and RBS-NatWest, amid the weak economy and the fallout from the eurozone crisis.

The Bank also held its quantitative easing (QE) programme - otherwise known as money-printing - at £325 billion after last month's £50 billion cash injection.

Economists have said it would take a seismic change in the economic and inflationary landscape to bring higher interest rates back to the table.

The combination of low rates and high levels of QE have been particularly painful for savers and those approaching retirement, although most homeowners have benefited, given the bank's base rate stood at 5% in October 2008.

The typical savings rate has plummeted from 6.52% in 2008 to 2.78%, since the bank started cutting borrowing costs.

It is thought that more than £100 billion is sitting in accounts which pay no interest, according to Bank figures, compared with around £15 billion-£20 billion in the years before the financial crisis.

Meanwhile, around £90 billion has been knocked off the value of final salary pension schemes due to recent QE measures, according to the National Association of Pension Funds.

The Bank's Governor, Sir Mervyn King, has repeatedly expressed his sympathy for savers but has said the stimulus measures were needed to help the economy.

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