B of E cuts interest rates

frugal_dougal_3

The following is taken from news site:

The Bank of England today cut interest rates for the first time since July 2003, leaving the cost of borrowing at 4.5 per cent.

There had been widespread speculation ahead of today's announcement that interest rates would fall from their three-and-a-half year high of 4.75 per cent.

The Bank raises and lowers the cost of borrowing in the UK in an attempt to keep inflation as close to the government's target rate (currently two per cent) as possible.

Since last month's decision to hold interest rates, a suite of economic data has shown the UK stuttering - and the vast majority of economists predicted that the Bank would respond by cutting rates.

Surveys by Reuters and Bloomberg revealed that 78 out of the 87 economists polled, expected a rate cut, with the rest expecting a freeze.

"A 0.25 per cent interest rate cut to 4.5 per cent now seems a nailed-on certainty on Thursday," said Howard Archer, chief UK economist at consultancy firm Global Insight, ahead of the decision.

In the run-up to the meeting influential groups including the Confederation of British Industry and the Institute of Directors also called for rates to fall.

And in its 100th meeting the MPC did not disappoint - reducing the cost of borrowing for the first time in 25 months.

The 0.25 per cent fall in interest rates will reduce mortgage repayments for the millions of homeowners on variable rate, discounted rate, capped, and tracker mortgages.

However, it will also see a fall in the rate of interest paid on many savings accounts.

By making debt cheaper and savings less lucrative, a cut in interest rates should have the effect of boosting spending, as well as offering support for the ailing property market.

Over its 100 meetings to date, the MPC has held interest rates 69 times, increased them 14 times and cut them 17 times.

meanmachine_2

But if the MPC don't follow it up with another cut in the next month or two, then what's the point?

If it's not the start of a trend - which most "experts" think it isn't - then it's all a bit silly really.

Cutting it .25% only to raise it in the new year.

It's hardly going to help a FTBer like me.

Woby_Tide

meanmachine wrote:

But if the MPC don't follow it up with another cut in the next month or two, then what's the point?

If it's not the start of a trend - which most "experts" think it isn't - then it's all a bit silly really.

Cutting it .25% only to raise it in the new year.

It's hardly going to help a FTBer like me.

Oooo checkmate. On the mortgages board you've just moaned you want the rate to go up due to your savings "so you don't have to bail out the borrowers". Make your mind up.Like you tell the homeowners, you can't have your cake and eat it.

Ian_W

Make your mind up.Like you tell the homeowners, you can't have your cake and eat it.

Hang on mate - that's not fair...

He always has his cake and eats it! :rotfl:

Mr_Proctalgia

I sometimes get the feeling that MeanMachine would complain about winning the lottery if it meant he had to count it all!

frugal_dougal_3

Mr_Proctalgia wrote:

I sometimes get the feeling that MeanMachine would complain about winning the lottery if it meant he had to count it all!

Maybe he would be better off looking at http://http://www.angrytowers.com/

simonkirkland

frugal_dougal wrote:

Maybe he would be better off looking at http://http://www.angrytowers.com/

I think you mean:

http://www.angrytowers.com/

One to many http's... :-)

he is called meanmachine... not nice machine...

meanmachine_2

Maybe I should make my position a little clearer. I have no wish to see interest rates fall, thereby sparking yet another ridiculous property boom that leaves a whole generation of FTBers out in the cold.

As a FTBer I need interest rates to go up. I have savings - including money for a deposit - which I need to build on.

Where in my statement, or in any other statement is that contradictory?

I'd much rather have average house prices @ 100K, with 10% interest rates, than 200K at 5% int.

Higher int rates, higher inflation, the faster your debt erodes.

Anyone with large debts who is advocating a low inflation, low interest rate economy needs their head examined.

"Checkmate". :rolleyes:

frugal_dougal_3

simonkirkland wrote:

I think you mean:

http://www.angrytowers.com/

One to many http's... :-)

What do you put in that first box then? It gave several options but none of them seemed right.

dccarm

meanmachine wrote:

Higher int rates, higher inflation, the faster your debt erodes.

Anyone with large debts who is advocating a low inflation, low interest rate economy needs their head examined.

"Checkmate". :rolleyes:

I must need my head examined (although my debts are not particularly high).

Higher inflation means my ability to pay my debts every month is reduced as I have to commit a larger amount to other expenditure. And higher interest rates mean I have to pay back a greater amount every month to maintain my level of repayments. Unless of course my wages increase at a rate higher tahn that of inflation (I wish!)

meanmachine_2

Forgive me, it's implied in my post that in a high inflation economy, wage inflation is also high - that's why inflation quickly diminishes someone's debt.

It's why *groan* people who bought in the 80s only paid 3 and a half pence for their property.

Today, £200K is still going to be a huge amount in 10 years' time.

And yes, if you're taking out a huge mortgage, the pain is greater. But as I say, those with savings, and a larger deposit to put down are better off with high int rates and lower property prices, since they have to take out much smaller mortgages.

I'd much rather have a 50K mortgage at 10% with inflation eroding my debt, that a 150K mortgage @ 3.5% and low inflation.

Bu that's just me. Clearly, in these buy now, pay later times, I'm a thickie.