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Tracker mortgage relief as base rate stays at 0.5%

Thursday, 7 April 2011 4:29 PM

The Bank of England's decision, once again, to keep the base rate of interest at 0.5 per cent could come as a relief to anyone on a tracker mortgage.

In recent months, the Monetary Policy Committee (MPC) has shown increasing disagreement about whether the rate should remain at its all-time low, or move upwards.

Last month, the minutes of the MPC meeting showed six of the nine committee members were happy to keep the base rate at 0.5 per cent.

However, two preferred a 0.25 percentage point increase – and Andrew Sentance was alone in wanting to double the rate to one per cent.

Ray Boulger of independent mortgage expert John Charcol pointed out that the margin between tracker mortgages and fixed-rate deals is now well pronounced, while the low-rate environment is a chance for homeowners to clear more of their debt.

"Overpaying while rates remain low offers the twin benefits of reducing the mortgage balance ... and softening the psychological blow when rates do rise," he said.

The next MPC decision could be the most interesting in many months for economists.

In May, the quarterly Inflation Report is due for publication – an event that has triggered a rate change from the committee a number of times in the past.

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