The Bank of England’s Monetary Policy Committee (MPC) voted unanimously in favour of both keeping the Bank Rate at 0.5% and minting the current level of its asset purchase programme – so-called quantitative easing (QE) – earlier in the month.
In its minutes, published today, the MCP said it could take stock of the impact of the Funding for Lending scheme (FLS) and the implications this had for other potential policy options.
The minutes noted: “For some members the decision was nevertheless more finely balanced, since a good case could be made at this meeting for more asset purchases. For those members who had voted against the expansion of the programme at the previous meeting, there were potentially costs to reversing the previous month’s decision.”
David Brown, commercial director of LSL Property Services, added: “The MPC were always unlikely to boost the asset purchase programme so soon after the launch of the Funding for Lending Scheme, but several members were still tempted by it.
“While more QE seems to be the fallback position by the MPC to get the economy moving, it comes at a cost of pushing up the likelihood of increased inflation. Would-be buyers are already struggling to save the substantial deposits lenders require for affordable rates, with rising rental costs taking their toll. Even higher rates of inflation would further undermine their ability to save for a deposit.
“A healthy housing market is the cornerstone of a healthy economy, and it is crucial that the Funding for Lending Scheme proves to be a success at unlocking the lower echelons of the market, making house purchase a more achievable goal for many.”