Bank Of England Rate To Remain At 5%
After the monthly meeting of the Bank of England’s interest setting committee, it was announced yesterday that the base rate of interest would remain constant at the current level of 5.0%.
The news does not come as any great surprise as many experts have been predicting this decision. Keeping interest rates at 5.0% is a move to help stabilise the economy following a turbulent time in recent months and should go a long way towards stopping rising costs and maintaining a low level of inflation.
So what does this mean for those individuals with loans and mortgages? Those people who are on standard variable rate loans or tracker loans will not see any difference in their monthly payments. Perhaps the worst affected will be those borrowers who are coming to the end of a low, fixed rate deal with their lender. These individual’s are likely to experience a dramatic rise in their monthly repayments as they move onto a high standard variable loan rate, a blow which would have been softened had there been a rate reduction.
We have seen a couple of reductions in the Bank base rate since the beginning of the year and many economists are predicting the next reduction is likely to be in June. However, despite these rate cuts, along with a £50bn cash injection from the Bank of England, many major banks and other lending institutions are not passing these savings onto their customers and are maintaining their interest rates at current levels, some are even increasing rates in a bid to restore their own capital positions and liquidity in the market. The Government is insisting that these savings are passed onto customers who are paying for the Banks’ previous mistakes, but it may still be some time yet before borrowers (other than those on a tracker rate) start to feel the full benefits of any interest rate reductions.
