Drop in interest rates causes surprise for consumers
November 30, 2008 by admin
Filed under News, News-Mortgages
Struggling homeowners trying to cope with high mortgage repayments welcomed a surprise earlier this month after the Bank of England slashed the base rate by 1.5% just a month after applying a surprise 0.5% cut a day ahead of the scheduled Monetary Policy Committee meeting. The slash in interest rates has now taken the base rate down to just 3%. Just a year ago the base rate stood at 5.75%, so it is now nearly half of what it was a year ago.
The interest rate cut is said to be the most dramatic since 1981, and industry officials have said that it shows just how concerned the government and the central bank are about the state of the economy and the threat of a deep recession. Government officials are now putting banks under pressure to pass on the full rate cut to borrowers in order to try and boost spending, ease financial problems, and ultimately breathe life back into the economy.
After the rate cut was announced the Chancellor, Alistair Darling, stated: “I think it’s essential that the banks do pass on the benefit of lower interest rates to people and to businesses. Banks need to understand that they need to help their customers.”
However, the Shadow Chancellor, George Osborne, stated: “This is a shot in the arm for the economy, but it shows how sick the patient is.”
An official from the CBI said: “This is a bold and welcome move by the Monetary Policy Committee, and achieves what the CBI had been calling for.”
He added: “This cut should help to ease conditions in the credit markets, and allow banks to pass the benefits on to their customers.”
Tags: interest rates, order, chancellor, bank of england, Business Finance, policy
