Those who have been pressing for a cut in interest rates will be pleased to hear that the Bank of England’s Monetary Policy Committee has voted to reduce the rate from 5.75 per cent to 5.5 per cent. "Although output in the United Kingdom has expanded at a brisk pace for the past two years, there are now signs that growth has begun to slow," the Bank said.
Director at Fair Investment Company, James Caldwell, says this is good news for homeowners.“The Bank of England's decision to cut rates by 0.25 per cent to 5.5 per cent is an early Christmas present to homeowners and those looking to take their first step onto the housing ladder," he said.
Recent turbulence in the financial markets has led to restricted credit conditions which have hit householders and businesses alike. The Bank reports that CPI inflation was 2.1 per cent in October and that higher energy and food prices are expected to keep inflation above the target in the short term.
“Some rates have increased as a result of the tightening in the credit markets, so this cut should make it cheaper for people taking out a new mortgage and also easier for the millions of borrowers coming out of low fixed-rate mortgages to find a new deal," said Mr Caldwell.
The Committee says it will monitor the inflation situation carefully and that slowing demand growth should ease the pressures on supply capacity, bringing inflation back to target in the medium term. It deemed the 0.25 per cent cut as a necessary measure to meet the two per cent target for CPI inflation.
This should move should be welcomed by many people who have been struggling with rising rates; Mr Caldwell continued "Those with variable rate mortgages have been really stretched over recent months so this rate cut will mean a welcome reduction in their monthly payments; that extra £30 a month could make all the difference for some people, especially at such an expensive time of year.”
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