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|Base rate cut ‘should be kept in perspective’|
|Thursday, 04 August 2016|
The Bank of England’s Monetary Policy Committee today took the decision to cut interest rates to 0.25 percent, the first cut since March 2009, as part of a package of economic stimulus measures in the wake of the EU referendum result.
The Bank also announced a new lending programme worth £100bn to encourage banks to lend to businesses and consumers, and revised down its growth forecasts for the UK economy.
Jane Tully, director of external affairs at the Money Advice Trust, the charity that runs National Debtline, commented: “The Bank of England’s economic reasons for encouraging borrowing and spending are understandable. However, it is important to look at the ‘micro’ as well as the ‘macro’ – and to keep this rate cut in perspective.”
“Today’s rate cut is certainly good news for those with a tracker mortgage, and possibly good news for those on a Standard Variable Rate. For non-homeowners, a lower base rate could make joining the housing ladder slightly more affordable.
“However, nearly half of mortgage-payers are on a fixed-rate deal and will not see any immediate benefit. The rate cut is unlikely to mean any change for overdrafts, credit cards or personal loans. And many savers, of course, will lose even more of what little interest they have been receiving in this era of ultra-low rates.
“It is also important that households do not find themselves in a false sense of security given what could lie ahead. The Bank of England’s revised growth forecasts point to choppy waters ahead for the UK economy, and the impact that this could have on many households budgets will far outweigh the impact of today’s rate cut.
“It has never been more important for people to take action to review their personal finances, and seek free advice if they are struggling to cope with existing debts.”
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