MPC Maintains Interest Rates

Posted by Mark Dawson

May 14, 2008

by Mark Dawson

The Bank of England announced today that the base rate of interest will remain unchanged.

In its meeting today, the Bank of England’s monetary policy committee (MPC) has decided to maintain interest rates at five per cent. This will be the third time the committee has decided not changed the rate this year and follows cuts of 0.25 per cent which were actioned in both April and February.

Following on from the MPC’s decision, it is possible that consumers find the pressures which their finances are under does not worsen. And during the current period of economic uncertainty, homeowners may find that their monthly mortgage repayments remain the same. In addition, people could discover that their capacity to manage other monetary demands - such as credit and store cards, personal loans and utility bills - is not put under additional strain.

Equity strategist for Barclays Stockbrokers, Henk Potts made the following comments: “The monetary policy committee is caught between a slow growth rock and a high inflation hard place. UK economic growth is clearly moderating; consensus forecasts are for growth of just 1.6 per cent this year compared to the three per cent expansion recorded in 2007. However, outside the housing market and survey data, there is little hard evidence of a marked slowdown in UK aggregate demand.”

He added that headline inflation is set to “remain elevated” for much of the remainder of 2008, while the consumer price index inflation is predicted to move above the current rate of 2.4 per cent. Mr Potts attributed the increase in the latter towards rising energy prices and continuing depreciation of the pound. However, he pointed out that the Bank of England is set to carry out a series of decreases to the base rate of interest, with this predicted to stand at 4.25 per cent by the end of this year.

Meanwhile, Michael Coogan, director general at the Council of Mortgage Lenders (CML), claimed that although the MPC was required to strike a balance between slowing economic growth and rising inflationary pressures when making its decision, it is “disappointing” that a chance to cut the base rate has not been taken. He went on to report that although the housing and mortgage markets are to face challenges over the remainder of 2008, most homeowners appear to be “coping well”.

However, Mr Coogan advised those consumers who are experiencing difficulties in managing their money or are concerned that they may soon develop problems to get in touch with their loan lender or a debt advisory service as soon as possible.

For those who have concerns about their ability to manage their money as the year progresses now might be an ideal time to take out a cheap loan. Taking this type of loan, will enable borrowers to supplement their spending effectively and help with making major purchases.

An increasing number of homeowners are looking for mortgage products which follow any changes to the base rate of interest according to research carried out by the CML last month. 35 per cent of consumers were shown to be taking out tracker rate mortgages in February this year, more than double the 14 per cent recorded during the same month in 2007.

About the Author:

Mark Dawson writes for the the UK Loan Arrangers where you can compare cheap loans and apply online for cheaper secured loans, and direct loans.

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