UK Economy Should retrieve After Interest Rate Cut

The economy will be helped to retrieve by the Bank of England’s interest rate cut, it has been claimed. Vicky Redwood from Capital Economics stated that last week’s base rate cut will increase confidence within financial markets, adding that rates are “probably going to fall a lot further”.

“We think rates could fall to at the minimum one per cent, we certainly wouldn’t rule out them falling below that,” she commented. Such a drop in interest rates could lower the cost of buy to let mortgages.

However, Ms Redwood warned that confidence would only increase if “policy makers are willing to pull out all the stops” to aid the economy.

The Bank of England’s monetary policy committee (MPC) met on November 6th and voted to slash the base rate to three per cent. This “meaningful” reduction was required to help the MPC meet its inflation targets, the committee revealed. Angela Knight, the chief executive of the British Bankers’ Association, said that its members were “grateful” for the sustain they have received from the government and the Bank of England.

“edges are committed to doing their part to help rebuild the UK economy in addition as ensuring we help and sustain all our customers,” she commented.

Ms Knight acknowledged that many people are “concerned about making ends meet” in the current climate and that the interest rate cut is to be welcomed. Ms Knight also recommended that anyone who is struggling to meet repayments should talk to lenders “sooner instead of later”.

Investors with buy to let mortgages are set to assistance from the high street edges’ reaction to the base rate cut and a fall in Libor, the interbank lending rate. Those on standard variable deals that track the Bank’s base rate will automatically assistance from the reduction, while lenders may be prompted to make further cuts across their mortgage portfolios. Keshav Thukaram, Managing Director of the SmartLandLord website, said the government has made “clear signals” to edges and building societies that they must return to 2007 levels of lending.

“New mortgages and new character sales will not gather momentum unless the rate cuts are passed on to landlords for their new mortgages and remortgages,” he commented.

Meanwhile, the National Association of Estate Agents has stated that any edges that do not pass on the base rate cut are acting in defiance of the government’s wishes.

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