Further Interest Rate Cuts Seem Likely
We are now starting to get used to seeing the Bank of England cut interest rates on a regular monthly basis in order to try and help combat the effects of the economic down turn and this month was no exception, with the Bank’s Monetary Policy Committee (MPC) voting unanimously to cut the base rate by a further 100 basis points, or 1 per cent.
This is clearly good news for borrowers with homeowner loans, particularly those with tracker loans, as their monthly repayments are dropping significantly, although as the rate cuts continue fewer and fewer banks and building societies are passing on the full extent of these reductions to their loan customers.
But with the level of recent cuts, many individuals are now wondering how far this can go and have we now seen the lowest rate of interest we are going to? It would appear not.
The minutes from Decembers MPC meeting have now been released and it has emerged that a larger rate cut than the 1 per cent was seriously considered by the committee, although after discussion it was agreed that 1 per cent would be required, but any more than this could cause further problems for the exchange rate and also reduce confidence in the economy even lower than it already is.
But now, with inflation falling to 4.1 per cent and continuing to reduce in line with predictions, this clears the way for further interest rate cuts over the coming months and it now seems likely that we will see further reductions early on in the New Year.
The main hope for the majority of individuals with a homeowner loan or mortgage is that their lender will pass on the benefits of these rate cuts and make the cost of their loan even cheaper.
