The Loans Organisation - Articles - Interest Rate Cut
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Articles > Interest Rates CutIn the monthly meeting of the Bank of England’s Monetary Policy Committee (MPC) on August 4th, it was decided that a quarter point reduction be made to the base rate of interest. This puts the base rate at 4.5% and is the first time that the rate has changed in twelve months, thankfully for mortgage holders and high street retailers it moved in the downwards direction.The move by the MPC was welcomed by the retail sector as it has been struggling in recent months with poor sales, and traditionally lower interest rates stimulate consumer spending, as there is less incentive to save, and lower mortgage costs mean people have more disposable income. Whilst this is all good news for shops and mortgage payers, there is a flip-side to interest rate cuts, and that is that savings rates also fall. This means that those with money in savings accounts will see less of a return on their money, and in fact most providers actually cut their rates in anticipation of the MPC’s announcement. The mortgage market is the most affected by any changes in interest rates, due to the large sums of money involved. At present the mortgage sector is relatively stagnant, and it is hoped that this cut will keep the market stable – it is not expected that this will stimulate the housing market as first time buyers will not find the cut all that helpful as it is generally the high deposits required that are the limiting factor. |
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