Interest rates, housing shortage, debt problems and pension woes

Despite speculation that it would cut rates, the Bank of England held the UK’s main interest rate at 0.5 per cent yesterday.

The Monetary Policy Committee voted 8-1 to leave rates unchanged, but minutes of the meeting showed most members expect the Bank will take some action next month. The Bank said: ‘Most members of the committee expect monetary policy to be loosened in August. The precise size and nature of any stimulatory measures will be determined during the August forecast and Inflation Report round.’ Interest rates have remained on hold since the Bank cut its key rate to the record low of 0.5 per cent in March 2009.

Kevin Caley, chairman of peer-to-peer lender ThinCats, said: ‘The Bank of England may have kept interest rates at 0.5 per cent for the time-being, but a rate cut to stimulate the economy and free up money for lending seems inevitable. When this happens, it will be miserable news for Britain’s hard-pressed savers, who have been earning dismal returns on their money since the financial crisis.

‘In such uncertain economic times, the prospect of interest rates returning to pre-crisis levels any time soon is highly unlikely and anyone with money in the bank should be rethinking their savings plans.’

As investors continue to digest the Bank of England’s latest decision, UK shares dipped further this morning and the pound edged higher. At