This will be welcome news for the nation's savers who have seen returns plummet in recent months. And while homeowners on tracker mortgages may be disappointed that rates haven't fallen again, after enjoying six consecutive months of cuts, the MPC's decision to hold fire could signify brighter days ahead.
For more on what this month's interest rate decision means for savers and borrowers, watch our video with Kevin Mountford and Louise Cuming, moneysupermarket.com's savings and mortgage experts.
So has the troubled economy finally bumped to its bottom and how long before it starts to come back up for air?
Mixed messages
There has been no end of conflicting data over recent weeks, some suggesting signs of improvement, others indicating that the downturn is far from over. The National Institute of Economic and Social Research, a think tank, warned that the economy may not recover until 2012.
Unemployment is still rising having hit two million in March, and although Nationwide's latest house price figures revealed a surprise 0.9% increase last month, the building society's chief economist, Fionnuala Earley said it is still far too early to say "the trough in the market has been reached". In fact, Halifax data reported continuing falls - its house price index showed a 1.7% fall last month.
It's therefore premature to call an end to the recession but there are signs of improvements in the mortgage market. Latest mortgage approval figures from the Bank of England show that the number of home loans approved for house purchase in February stood at 37,937 - up from 31,791 on the previous month which is an increase of 19%. It's also the highest figure reported by the bank since May last year.
A waiting game
Whether the green light for mortgages will continue will hinge largely on the outcome of the Government's quantitative easing programme, announced with last month's interest rate decision.
This is the new strategy whereby the Government aims to pump £75billion of new money into the system by purchasing bonds from financial institutions and other firms. The theory is that banks will then have more money which in turn can be lent out to individuals and businesses. If this strategy works, we should see more competitive mortgage deals launched in the coming months which will help bring an end to the mortgage impasse that has been strangling the market.
Lenders playing ball
Mortgage analysts say it's too soon to know whether quantitative easing will achieve the desired results. However, there are early indications that pressure on lenders may be easing slightly.
HSBC has been one of the most competitive players in the mortgage market for some time, but it has further enhanced its offerings. It has kept the rate on its lifetime tracker unchanged at 2.95%, but the product is now available for loans up to 85% of the property's value. Previously, this deal was only available to those with a deposit of 40% or more.
In addition to relaxing the criteria on this deal, HSBC has also announced a new range of mortgages which will be available for Plus and Premier accounts from Tuesday. Included are some market-leading deals available for loans up to 90%: it will offer a two-year fix at 4.99% with a £1,499 booking fee and an alternative two-year fix at 5.49% with a £199 fee (despite the higher rate, the 5.49% deal will be better value over the fixed term than the 4.99% product).
Louise Cuming, head of mortgages at moneysupermarket.com, said: "HSBC continues as one of the few lenders actively seeking to steer the mortgage market at the moment. Let's just hope its latest move and the Government's quantitative easing strategy will spur other lenders in to taking action. However, for the moment, equity is still king and the best deals remain available only to those with a large deposit."
First-time buyers
While today's first-time buyers may finally feel less victimised over rising house prices, those who can't lay their hands on fat deposits have been hit with disproportionately high interest rates instead.
If other lenders follow HSBC's lead then things may pick up for those who can scrape a 10% deposit together. However, if you only have 5% to put down, you will still pay a hefty premium. Yorkshire Bank has the leading deal for those needing to borrow 95%. It is a three-year fix with a £599 arrangement fee, but the rate is 6.99%.
HSBC's new two-year fixed rates will enable those with a 10% deposit to lock in at 4.99% or 5.49%, but rates are even lower if you have a larger deposit. First Direct has a two-year fix at 2.99% if you have 25% or more to put down and if you have a 40% deposit you can lock in at 2.89% with HSBC. The arrangement fees are £899 and £1,499 respectively.
If you are looking for a mortgage, but unsure about what deal to go for an independent adviser will be able to help.
Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.
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