Base rate held at 0.1%

The Bank of England left the base rate unchanged at 0.1% this month, amid warnings that the UK is heading into its first recession for more than a decade.

The Bank’s Monetary Policy Committee voted unanimously to hold the rate at its current record low, to help support economic activity during the coronavirus pandemic. Unemployment has increased significantly since the crisis started and is expected to continue to rise, with both individuals and businesses suffering severe financial disruption.

Low interest rates should however help homebuyers and those looking to remortgage, as mortgage rates remain extremely competitive. Many lenders are offering automated valuations for remortgages whilst social distancing measures apply, so now could be a good time to lock into a low rate deal. You can see current best buy remortgage deals here.

Outlook for next year

The outlook for the UK and global economies is “unusually uncertain”, the Bank said, and will depend on how the pandemic evolves and how households, businesses and governments respond to it. However, assuming that social distancing measures will start to be relaxed over the next few months, the Bank forecasts that economic activity should pick up “relatively rapidly” after this happens.

Members were split on whether to boost economic stimulus by increasing quantitative easing (QE). This involves the Bank creating new money electronically to buy financial assets such as government or corporate bonds. The aim of QE is that it will increase demand for bonds, which in turn lowers the yield, bringing down long-term interest rates and making borrowing cheaper.

Seven members of the Committee voted for the Bank of England to continue with the current £200 billion programme of bond purchases, whilst two voted in favour of increasing purchases by an additional £100 billion. The MPC said it would continue to monitor the situation and “stands ready to take further action as necessary” to support the economy.