Bid to get debt free may be helped by base rate move

All nine members of the Bank of England's Monetary Policy Committee (MPC) have visited to hold the base rate, which could signal that the record low cost of borrowing is set to stay in place for many months to come.

Minutes of the August meeting of the body revealed the universal sentiment, a contrast with recent splits that saw three members supporting a rate rise as recently as February.

Although one of the trio – Andrew Sentance – left the MPC after that meeting, the support of Spencer Dale and Martin Weale remained until this month.

With consumers being charged less interest on some of their debts than they might otherwise be – not least mortgages – now may be a very good time to instigate a debt management plan and get debt free as soon as possible.

This is because lower mortgage payments may make available cash that would otherwise be unavailable for paying off borrowing such as credit card balances.

The MPC made its decision based on the reasoning that a rate hike could damage the economy and send it spiralling back towards recession, which in turn would cause inflation to undershoot its target as the economy plunged.

And the body said "temporary" factors such as the VAT hike and commodity prices have been the main causes of the rise, both of which are expected to drop back in the next few months.

While commodity price trends are uncertain, the VAT impact will automatically vanish as it was imposed in January, meaning its year-on-year effect on prices for each month of this year will be absent from the equation in 2012.

This month is the first unanimous vote for a base rate hold since May last year.

By James Francis