News

The costs of borrowing for a mortgage have remained the same this month as the The Bank of England has held interest rates at the record low of 0.5%.

The Bank’s Monetary Policy Committee (MPC) voted by 8 to 1 to keep rates unchanged.

One committee member, Ian McCafferty, disagreed with the majority outlook and voted for a quarter-point rate rise for a third month in a row.

UK interest rates have now remained unchanged for more than six years.

This had been widely expected and Mark Carney, Bank governor and a member of the committee, has previously indicated a hike would “come into sharper focus” around the turn of the year.

But in the minutes – which, under a new system to encourage market transparency, have been published alongside the decision – the members indicate a general consensus view that inflation will rise slower than expected, which could put off a rates rise.

Price rises are now expected to be below one per cent until spring 2016, while a return to the two per cent target may not happen in the next two years.

The discussion also noted improvements in productivity in recent months, which is limiting any upwards pressure on labour unit costs – the cost to companies for each hour of output – and also acting as a drag on inflation.

A slowdown in China, with the BBC saying there is little evidence of problems “having much impact on advanced economies”. This, some have suggested, leaves the door open for a rates hike on the timetable already set out: early 2016.

Alan Wilson, analyst at Aberdeen Asset Management, said the MPC decision “marks a return to a more cautious tone” and that “the prospect of a rate rise is some way off”.

Howard Archer of IHS Global Insight said “an interest rate hike… sometime in the first half of 2016 still looks much more likely than not”.