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Interest rates held for fourth month

Thursday, 4 June 2009 2:06 PM

The Bank of England today announced it would be holding interest rates at 0.5 per cent, for the third consecutive month.

The historically low level of interest was announced alongside a continued focus on quantitative easing.

Housing market specialists were left unsurprised by the news, which had been predicted for some time.

Royal Institution of Chartered Surveyors (Rics) chief economist Simon Rubinsohn said: "Predictably the Bank of England has left interest rates unchanged today and also did the same with its programme of asset purchases.

"Tentative signs that this strategy is beginning to pay dividends is evident. We are seeing a modest improvement in sentiment in the housing market and the service sector, as well as less negative news from the high street. That said, significant headwinds remain and the authorities are right to remain committed to the current approach of keeping interest as low as possible and providing incentives to help facilitate lending where possible."

The MPC first reduced the base rate to 0.5 per cent back in March. While this may spell bad news for anyone trying to save right now, the decision is hoped to help homeowners with their mortgage repayments, as well as encouraging lending to stimulate the housing market.

David Brown, commercial director at LSL Property Services, said: "The Bank's policy of quantitative easing seems to be helping oil the wheels of the economy. But we can't get ahead of ourselves - it's vital that the Bank doesn't cap the supply too soon.

"The vast proportion of buyers out there are self-funded or have large deposits - many others still struggle to get a mortgage and transactions in the housing market are low. There's a long way to go before the housing market and the wider economy are back in the race, but they may at least have begun to get their breath back."

"News that the base rate is to remain at 0.5 per cent can only reassure homebuyers further, as keeping this rate at a low level over the next few months will be key to driving housing market revival. Of course, pent up demand can only be satisfied if the level of mortgage approvals continues to increase and a greater supply of properties come on to the market," Lee Bramzell, chief executive of portal PropertyIndex.com, added.

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