Good news for homeowners as Bank of England reveals interest rates won't rise for months

Minutes of the Bank of England's Monetary Policy Committee reveal that interest rates will remain low for the coming year

Not all doom and gloom: Minutes of the Bank of England's Monetary Policy Committee reveal that interest rates will remain low for the coming year

Interest rates will stay at historic lows well into next year in a welcome boost to homeowners, a key report suggests. 

It means families enjoying dramatically lower monthly payments due to plunging rates will continue to do so for months to come. 

The revelation could also encourage lenders to offer better deals to first-time buyers, according to brokers. 

But it is bad news for savers, especially pensioners, who have seen their returns dwindle to practically nothing and cannot expect them to recover any time soon. 

The minutes from this month's meeting of the Bank of England's Monetary Policy Committee revealed there was no discussion at all about increasing the interest rate. 

The base rate has fallen from 5 per cent in October last year to 0.5 per cent, where it has remained stable for two months in a row. 


Howard Archer, of the consultancy IHS Global Insight, said: 'The report reinforces the belief that interest rates are highly likely to have troughed at 0.5 per cent but are not going to rise for some considerable time to come.

'The MPC has indicated that they believe bringing rates down further would only have a very limited positive impact at best on the economy.'

Lloyds TSB, the country's largest bank, is offering first-time buyers a cheap mortgage with a 5 per cent deposit

Bargain basement: Lloyds TSB, the country's largest bank, is offering first-time buyers a cheap mortgage with a 5 per cent deposit

There are already signs that the mortgage market is opening up to those struggling to buy a home.

This week, Britain's biggest bank, Lloyds TSB, waded into the battle for first-time buyers by offering a cheap mortgage with just a 5 per cent deposit, in exchange for 20 per cent of the mortgage value being held in a savings account by the bank.

The deal allows buyers to tap into their parents' savings or those of a friend to help them get on the property ladder.

Richard Morea, of mortgage brokers London & Country, said: 'Rather than good rates being offered only for very low 60 per cent deals, what we might see is a bit more innovation and lenders trimming off a bit of the rate at higher loan-to-values.

'Unfortunately, there isn't much good news for savers apart from the fact that mortgage lenders are desperate to keep their business, so they may be offered loyalty bonuses if they keep their money with them for a given amount of time.'

The MPC minutes also indicated that the Bank of England could vote to pump even more money into the economy in the coming months.

They showed that some committee members believed there was a case for £75billion increase to its quantitative easing programme, rather than the £50billion rise to £125billion that was agreed.

The longer interest rates remain at low levels, the more danger there is that homeowners will fall into a 'comfort trap' as they get used to their lower monthly outgoings.

It means many could be in for a shock when rates do finally rise, as they watch their payments rocket to last year's levels.

This could lead to more families facing repossession, especially if they have also been hit by redundancy or a pay freeze.

Mortgage brokers have reported a rise in homeowners switching to fixed rate deals in anticipation of a rise.

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