Loan Rates On Hold Again
People in the UK are now getting used to the idea of the Bank of England base rate of interest for loans and savings remaining at a particularly low level and therefore it will come as little surprise to most individual that the rate has stayed at 0.5 per cent for yet another month.
The Bank of England’s Monetary Policy Committee (MPC) met yesterday (Thursday 4th August) and decided that the base rate for loans and savings should remain at its historically low level, largely due to the fragile nature of the UK economy.
The decision on loan rates comes as no great surprise to financial experts, many of whom now expect the base rate to remain at its current level well into the middle of next year, at the very least.
Although the rate of inflation has come down over the course of the past couple of months, it is still running at 4.2 per cent, which is still more than double the government’s target figure of just 2 per cent, yet the MPC still believe that economic recovery is more important than high inflation and that raising loan rates could have potentially disastrous consequences for the economy at this stage.
This is, of course, good news for those individuals with a variable rate home owner loan, many of whom are already struggling to stay on top of their loan repayments and a rate rise could lead them into a serious loan arrears situation at the moment.
Ben Thompson of Legal & General mortgage club said “Although, as always, there is mixed economic news and results in both domestic and worldwide economies, if anything the headwinds in terms of recovery have become stronger over the last month and these will no doubt continue the slow pace of any UK recovery.”
“We see no indicators or statistics that would have provided even the faintest argument for a rate rise today and we remain of the view that rates will stay as they are for the rest of this year.”
