Saving and investing news
Interest rates stay the same
10 March, 2008
The Bank of England has kept interest rates at 5.25 per cent, which didn’t really come as a surprise to anyone.
Following February’s reduction, inflationary pressures had increased and the Bank uses interest rates to control inflation. Therefore no one anticipated that rates would rise this month. Experts do believe, however, that rates will come down again with some predicting they will drop to 5 per cent in May.
Mark Blackwell, director of intermediary sales at Alliance & Leicester, said he felt the decision was right but stressed borrowers should think about fixing their mortgage. "Whilst borrowers paying a variable rate benefited from last month's quarter point reduction, the market view is that MPC only has limited room for further manoeuvre in 2008,” he said.
“Fixed rate products continue to remain a wise choice for first time buyers, people moving house or refinancing. With 1.4 million borrowers expected to come off very low fixed rate products in 2008, choosing another similar product will help to manage the impact of higher monthly payments by fixing the amount therefore allowing homeowners to budget accordingly."
David Newnes, managing director of Your Move estate agents felt rates should have come down again. “The MPC ignored the possibility the housing market is going to cool and it’s property owners who’ll end up paying the price,” he said. “The market is stable at the moment – but that won’t last without some support from the MPC.
“House prices are holding up but the health of the market is still at risk. The number of buyers is coming back up – but we’re still under pressure. High borrowing costs mean many people are finding it harder to buy homes in the wake of the credit crunch. Banks and building societies have stopped offering high loan to value mortgages and this week some major lenders have put their mortgage rates up further.
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“The recent rate cuts haven’t been enough to alleviate the pressure on banks – and it’s consumers who are suffering. We need one more cut to tip the balance. The last two cuts have not been passed onto the borrower yet. A third would have allowed banks to put the borrower first.”
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