The base rate’s record breaking length of time on hold at a historic low could continue for months to come, with many economists predicting that there will be no change in base rate until at least the end of 2011.
However, rising money market rates and an inflation rate of 3.3% has led to speculation of an earlier rate rise this year from some.
In addition, the MPC has chosen to maintain its quantitative easing asset purchase programme (QE) at £200bn.
However, MPC members have continued to be split over what direction to take, with minutes from its December 2010 meeting showing Andrew Sentence continuing his call to raise base rate to 0.75%. Adam Posen also voted once more to raise QE by £50bn to a total of £250bn.
Minutes from this month’s meeting will be published on 27 January.
Jonathan Cornell, head of communications at First Action Finance, said: “It is getting harder and harder for the MPC to justify not increasing the base rate from its record low of 0.5%, as despite the government’s austerity measures, inflation is stubbornly rising above its 2% target, a level which seems a distant memory now. The MPC will be walking a tightrope trying to keep inflation under control without derailing the economic recovery.
“Those borrowers currently on their lender’s SVR who are waiting until the base rate moves before they remortgage are playing a dangerous game. In the last 2 weeks we have seen a number of lenders increasing their rates, partly as a result of swap rate increases and partly to manage their business levels. Those who sit and wait are going to be paying substantially more for their mortgage. Falling house prices may also mean they have to pay more for their mortgage if their loan to value increases above the maximum for their lenders cheapest rates. “
