The Bank of England’s monetary policy committee has opted to keep the base rate at 0.1 per cent by unanimous decision.

The bank will also continue with its quantitative easing programme.

In terms of the much speculated upon possibility of taking interest rates into negative territory, the MPC says that, “[it] had been briefed on the Bank of England’s plans to explore how a negative bank rate could be implemented effectively, should the outlook for inflation and output warrant it at some point during this period of low equilibrium rates.

“The Bank of England and the Prudential Regulation Authority will begin structured engagement on the operational considerations in 2020 Q4,” in continues.

As well as this, the MPC reports that 12-month inflation fell from 1 per cent in July to 0.2 per cent in August, which it puts down to the Eat Out to Help Out scheme and the cut in VAT for various parts of the service sector.

It adds that inflation is expected to remain below 1 per cent “until early 2021”.

The BoE expects 7 per cent drop in Q3 2020 on the Q4 2019 figure, a more positive reading than seen in last month’s report, but says that “considerable uncertainty ” remains over the labour market once government support schemes end.

Knight Frank partner Hina Bhudia says: “[This] is great news for most borrowers, and in recent days we’ve seen some lenders reduce the cost of mortgages at lower LTV ratios even further.

“However, anybody that needs finance at 85 per cent LTV and above are facing substantially higher rates than at the outset of the pandemic.

“That’s because lenders are now grappling with such a large volume of transactions that raising the cost of these mortgages, which are generally used by first-time buyers and the self employed, is the most efficient way of controlling the flow of new applications.

“The fact that some lenders have cut mortgage costs at lower LTVs may be a very early sign that the surge in transactions is subsiding. Should activity subside materially, we expect the high street lenders to begin competing for business once more, at which point we should see higher LTV mortgages move back into line with the rest of the market.”

Santander UK chief economist Frances Haque adds: “The MPC’s decision to leave [the] bank rate unchanged at 0.1 per cent was expected this month, along with the decision to keep the amount of quantitative easing undertaken by the Bank of England unchanged.

“However, although the economy has started to recover, there remains uncertainty caused by the ongoing issues around trade negotiations with the EU as well as the possibility of more stringent measures being imposed if Covid-19 cases start to increase rapidly.

“As a result, there continues to be a significant possibility of further rate cuts and more quantitative easing to help support the economy as we move through the tail end of 2020.”