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Five years on: what 0.5% rate has meant for the UK

Bank Of England Governor Mark Carney
Jason Alden | Getty Images
Bank Of England Governor Mark Carney

The era of record low interest rates in the U.K., which reaches its five-year anniversary on Wednesday, helped salvage the country's economy, but also created further problems.

First, the good bits: the U.K.'s economy is growing again, with improved growth of 2-3 percent expected in 2014, up from last year's 1.8 percent. House prices have proved to be surprisingly resilient, fuelled by low interest rates and schemes to boost lending.

(Read more: BoE's Carney unveils 'next phase' of forward guidance)

Unemployment is back down to near 7 percent, the point at which the Bank of England's Monetary Policy Committee said it would consider raising interest rates again. And insolvency rates have proven to be relatively low for a period of recession and stagnant economic growth.

However low interest rates have also potentially masked just how toxic some loans could be – and encouraged people to forget previous credit crises and borrow more. On top of this the low interest rates have meant that some £110 billion in payments on savings has been lost by U.K. households, according to the McKinsey Global Institute. Business investment does not seem to have been encouraged by low rates.

(Read more:Bank of England holds rates as pressure mounts)

Plus inflation in retail prices has outstripped wage growth, which means that the U.K. consumer has less cash to spend. Pension annuity rates are down by nearly 20 percent, according to Hargreaves Lansdown.

Low interest rates may have helped those who already own property, but the support they have lent to house prices, combined with a lack of new building, seems to have penalized younger people with aspirations to own property. The number of 25 to 34-year-olds who own a home has fallen from two million to 1.3 million in the past decade, according to official U.K. government figures.

The anniversary is likely to be the most interesting facet of Thursday's meeting of the MPC, which is universally expected to be non-eventfull, with the Bank maintaining interest rates at their record low. They will remain at 0.5 percent for at least another year, according to Samuel Tombs, UK economist at Capital Economics.

(Read more: Should the Bank of England abandon forward guidance?)

One notable difference between the MPC now and then is the consistency of their public pronouncements: its nine members are markedly similar in what they say. Back in 2008-9, there was much more divergence from the party line from relative rebels like David Blanchflower, who supported cutting interest rates much more quickly. Now, the committee's public remarks toe the party line, and are likely to remain so.

- By CNBC's Catherine Boyle. Twitter: @cboylecnbc.

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