UK base rate falls following MPC meeting
December 27, 2007
Following the Monetary Policy Committee meeting earlier this week the Bank of England has delivered some much needed good news to homeowners around the country.
Following a series of five interest rate rises since August 2006, and then several months of no movement at all on interest rates, homeowners have been struggling to keep up with repayments on variable rate mortgages, and this has been reflected by a sharp drop in consumer confidence levels, leaving the economy facing a real slowdown.
However, earlier this week the Bank of England announced that interest rates were to be cut for the first time in over two years. Although the rate has only fallen by 0.25%, taking the base rate from 5.75% - where is has been since July of this year – to 5.5%, it will still make a difference to many struggling homeowners that have had to scrabble around to find the money to make their rising mortgage repayments.
Michael Coogan, director general of the Council of Mortgage Lenders, stated: “A reduction in interest rates is exactly what the market needs and will benefit consumers. This will reduce the risk of payment shock for the 1.4 million borrowers coming off fixed rates in the next year.”
Another industry official stated that the Bank of England had to cut rates to avoid a slump in the economy. He stated: “It is about making sure that the slowdown, which seems to be happening, does not get out of control.”
Steve Radley, EEF’s chief economist, stated: “Though manufacturing remains in good health a number of warning lights for the economy are now flashing amber. This is a sensible pre-emptive move which will reassure business that the bank is on the case and help to cushion the economy from the worst effects of instability in the financial markets.”
Alan Wright
27th December 2007
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