Economic Downturn Could Hold Cheap Loans For Longer
Over the course of the past few months, there has been growing pressure on the Bank of England and increased talk of the base rate of interest for loans and savings going up sooner than was originally anticipated.
With signs of economic recovery in the UK and particularly due to the fact that inflation has risen dramatically to reach 3.7 per cent last month, there have been calls form financial experts and fears from borrowers with a large home owner loan, that interest rates could increase within the next few months, rather than into next year, or the year after, as was previously thought.
However, the latest figures from the Office of National Statistics (ONS), have shown that the UK economy actually contracted by 0.5 per cent over the course of the last three months of last year and although this is most likely due to the particularly bad weather, the news is likely to quash any fears of a sudden increase in loan interest rates.
The minutes of the last Monetary Policy Committee (MPC) meeting in early January have shown that two members of the committee voted to increase interest rates form the current level of just 0.5 per cent, to 0.75 per cent, but this was prior to the latest growth news being made available.
This is likely to come as good news for those individuals with variable or tracker rate home owner loans, many of whom simply could not afford for their loan repayments to increase, even by a small amount in the current economic conditions.
Ian Kernohan, an economist at Royal London said “I suspect the Monetary Policy Committee will take a calmer view of developments, however, this news supports our view that a rate rise in the UK is still some way off.”
