The Bank indicated that the Base Rate will be cut or raised depending on how the UK’s departure from the European Union pans out.
The Bank of England Base Rate has been held at 0.75% following a unanimous decision by the Monetary Policy Committee.
At the same time the Bank cut GDP growth forecasts for this year from 1.7% to 1.2%.
It indicated that the Base Rate will be cut or raised depending on how the UK’s departure from the European Union pans out.
The Bank said: “The economic outlook will continue to depend significantly on the nature of EU withdrawal, in particular: the new trading arrangements between the European Union and the United Kingdom; whether the transition to them is abrupt or smooth; and how households, businesses and financial markets respond.
“The appropriate path of monetary policy will depend on the balance of these effects on demand, supply and the exchange rate. The monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction.”
Frances Haque, Santander UK chief economist, said: “The decision to hold rates was widely expected by both the market and commentators, given the continued uncertainty around Brexit.
“Although inflation remains slightly above the 2% level and real wage growth continues its current trend, the MPC looks to have remained cautious in its approach, wanting to wait until the outcome on Brexit is known before raising rates further.
“Assuming a Brexit deal can be reached before the 29 March, the MPC will now likely wait until after this point before hiking rates again.”
Kevin Roberts, director of Legal & General Mortgage Club, said: “Given the ongoing political uncertainty, today’s decision to hold interest rates comes as no surprise.
“However, the fundamentals in the mortgage market remain strong.
“There is still plenty of support to help borrowers step onto and up the ladder, from new mortgage products for first-time buyers to the near record low interest rates we continue to see in the market.”
And Dilpreet Bhagrath, mortgage expert at Trussle, said: “While homeowners may feel comforted by the BoE’s current decision to hold interest rates, it’s essential people remain aware of their financial position.
“Market assumptions are doing the rounds, so while predicting the future can be risky, being prepared for either outcome is key.
“Three million homeowners are on a variable rate mortgage and if rates do rise again, they’ll feel the effects soon after. Even an increase of 0.25% can add £200-£300 onto your mortgage over the course of a year, depending on how much is left to pay on your loan.”
