06.11.08 by Andrew Montlake

Interest Rates Slashed

The Bank of England’s’ Monetary Policy Committee has again moved to slash UK interest rates, and this time by a massive 1.5%, with Bank Base now standing at 3.0%.

Many commentators have been saying for a while now that the MPC has been too cautious and we needed more aggressive action to get back on track to where perhaps we should be in order to help stave off the worst of the oncoming recession.

The Bank has not cut rates by more than half a percentage point since 1993 and this is the shock to the system that we badly need.

For quite some time, I have been saying that if we continued with the wait-and-see approach over interest rate cuts, it would soon be a case of waited-and-wished-we-flippin'-well-hadn't. However, the decision to cut rates by an incredible 1.5% today makes up ground and will hopefully inject some confidence into markets.

This should be great news for mortgage borrowers and small business owners, although savers will undoubtedly be hit.

The issue now is that unless lenders pass the cut onto borrowers in the form of more competitive mortgage rates, the effect it will have could be limited.

For those already with tracker rate mortgages, a 1.5% cut should see your monthly mortgage payments reduce by approximately £125 per £100,000 borrowed.

There are still some good tracker products available which I expect to be withdrawn and repriced upwards very quickly now. If you are looking to remortgage anytime in the next 6 months it is worthwhile locking into one of these products now.

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