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Interest Rate Cut May Help Clear Your Debt

Interest Rate Cut May Help Clear Your Debt The Bank of England has today reduced UK interest rates from 5.75 per cent to 5.5 per cent as the economy appears to be slowing down after a decade of strong growth. Interest rates rose for most of the last year but had remained the same since July. This cut is the first since August 2005.

The action comes after warnings from many companies – including Nationwide, Halifax, Tesco, and the Trades Union Council – had reported a lack of consumer confidence and demand, a fall in house prices, and higher borrowing and mortgage repayment costs over the last few months.

The Bank faced a difficult decision because of the effects of the ongoing credit crunch which have increased repayments and made it more difficult to borrow money. It has also been more difficult to remortgage or get a secured loan as house prices have begun to fall. This has meant that there has been less money to spend, and this could curtail economic growth. The Bank could have kept the rate at 5.75 per cent in an attempt to control inflation which is suffering from the current high prices for food and oil.

The cut in interest rates should mean that the economy will not go into recession and some people could see cheaper monthly mortgage repayments. Although those with tracker mortgages will see immediate benefits, about half of the mortgages in the UK are on fixed rates and will not be affected. Some mortgage providers have already responded to the cuts by reducing their own rates by the same amount. It is yet to be seen whether the benefits will be passed on to those with credit card debt though.

Remortgage News posted on 06 December 2007

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Property Experts Call for Cut in Interest Rates
Surveyors have argued that a cut is necessary to revitalise the property sector.

Property Price Drop Poll Is Welcomed
A BBC study has confounded the political credo that tumbling house prices are universally unpopular, as prices continue to fall across the UK.

Mortgage Slowdown Continues With Credit Crunch
The Bank of England has revealed that mortgage lending dropped again in March, along with house prices, although borrowing on loans and credit cards increased.

 
 

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