Thrifty Loans

As widely forecast, the Bank of England cut the base rate on Thursday by a quarter point to 5.25%, their lowest level since April 2007.

The message from the Bank of England seems to be that they are now more concerned about the direction of the economy than they are that inflation might creep up a notch or two because people may have more money in their pocket. The fact is they probably won’t, because if they get any benefit at all from the base rate cut it will probably only go to serving other price increases that they have already suffered – such as energy, fuel and food.

With the swingeing cuts in the United States, nearly all major experts were forecasting this cut, and some had even called for a half-point cut. The Bank of England was expected to deliver a cut, and if it had not, then in spite of a ‘no-change’ on the rate, the reaction would have been extremely negative given the weight of expectation.

The Bank will be hoping that the 0.25% cut will help to put more money into economy, give a boost to industry and raise consumer confidence.

Many mortgage holders will be hoping to benefit from the rate cut, but will that happen? Last time the Bank cut rates – December last year – many of the banks appeared very reluctant to pass on the cut; many still haven’t, and some have even increased some mortgage rates. Many of those people on cheap fixed rates from two and three years ago will be hoping for a cut in fixed rates so that they can get onto a good deal when thris finishes.

But will the banks cut rates this time?

It is unlikely that there will be a rush. It is most likely that they will adopt a ‘wait and see’ stance and see what the big boys do.

For those on tracker rates who should benefit from the full quarter point cut, they can expect to pay around £15 less per £100,000 borrowed