Interest Rates Cut to 1%

The Bank of England has once again made history by dropping its Base rate to 1%.

Will it make any difference to an economy in free fall? Probably not. Again the decreases are unlikely to be passed on to borrowers or businesses

The government and the Bank of England now have stakes in most of the High Street Banks and Building Societies such as Swindon based Nationwide with a massive 60% in Royal Bank of Scotland (RBS).

Ideally this would mean forcing institutions to start lending however the government does not appear to want to use this option.


Posted by Sean Wilson, Independent Financial Adviser, Swindon, Wiltshire.

Interest Rates cut by 0.5%

The Bank of England cut interest rates by 0.5% today. The new base rate is 1.5%, the lowest in the Bank's 315 year history

Normally this would see a reduction in rates for home owners & businesses. The question continued to be asked is "Will the banks pass it on to consumers?"

The Bank of England is also talking about printing money to lend to banks, something usually associated with countries with dire economic conditions or at war.

Interest Rate cut of 1.5%

As anticipated the Bank of England cut interest rates to 3%. The lowest in some 50 years.

Will mortgage rates come down?

That is the important question, banks and building societies have not been passing on reductions to consumers because they have been worried about their profit margins.

There are some lenders who would be able to lower rates substantially but are not doing so becasue of lack of competition in the market place.

Will savers be hit?

Yes, rates for savers will reduced much quicker than for lenders.

Bank of England lowers Interest Rates

The Bank of England yesterday lowered interest rates to 5%.

Will this mean lower mortgage interest rates?

Hmmm...it depends

1 Lenders had priced in the likely decrease into new tracker/discounted mortgages. it's like when supermarkets put up drink prices in November to claim a massive drop just before Christmas
2 Some organisations are not passing on the full 0.25% drop, with Nationwide you may only get a 0.12% drop.
3 Other banks are "reviewing rates within the next 2 weeks"

Interest Rates fall 0.25% to 5.25%

As widely predicted the Bank of England reduced interest rates by a quarter of a percent to 5.25%.

It is a bid to stimulate the economy by putting more money in people's pockets. Is this a good thing? Not if it encourages people to borrow more money, as that it partly why economic problems possibly loom.

Interestingly the reason why the Bank of England put up rates several times last year before last summer's "credit crunch" was because of fears of inflation caused by borrowing. Fuel & food inflation is still around....

What next for interest rates?

In the last 2 years the Bank of England's Base rate has risen from 3.5% to 5.75%, with products like mortgages & loans being linked to it.

The main reason for the rise was to control inflation and partly tot try to control the housing market.

Things have taken an unexpected twist recently with the sub prime mortgage problems in the US. To deal with this the US Federal reserve (the equivalent of the Bank of England) has lowered the rate at which it lends money to banks.

What does this mean for the UK, financial advisers & their clients in Swindon?

The rise in interest rates [& the forecasedt end of the world :)] is likely to stop for the time being. Tracker /discounted mortgages could become more attractive again as arrangement fees for Fixed Rate mortgages are now rather high.

Interest Rate Rise likely to control Inflation

An increase in interest rates is increasingly likely after inflation figures rose to 3.1%.

Philip Shaw, chief economist at Investec Securities, said: "Today's figures mean that a May hike is now even more of a cast-iron certainty than previously. Our forecast that rates will peak at 5.5% is under review."

Richard Woolnough of M&G expects a rise in May & one in the autumn & winter to bring rates up to 5.75%.

Conclusion: If you are buying a house or remortgaging, opt for a fixed rate option.