Latest Debt News
Mixed response to rate decision
12/12/2005 15:00:00
The industry has given a mixed response to the Bank of England's decision to freeze interest rates.
Industry figures widely predicted last Thursday's decision to hold the underlying cost of borrowing at 4.5 per cent, but are less unanimous in their support for the Bank's Monetary Policy Committee (MPC).
The move was hailed as good news for savers, although it was welcomed less by those in debt.
Many insiders have interpreted the freeze as a conservative measure, arguing that a further cut is necessary to boost the UK's flagging economy and property market.
"The modest improvement in the housing market over the last few months is encouraging but it will need at least two more 0.25 per cent cuts to act as a catalyst in restoring enough confidence for a further meaningful improvement," warned Ray Boulger of mortgage broker John Charcol.
However, he told myfinances.co.uk that he expected lenders to reduce their fixed rates early in 2006, in anticipation of later cuts by the Bank.
David Frost, director general of the British Chamber of Commerce, also disagreed with the decision, arguing that the MPC had failed to take the action necessary to reinvigorate the UK's worsening economic situation.
He warned the MPC against waiting too long before implementing a further cut, warning of the adverse effects of delay.
Most economists are now predicting that rates will stay stable until February, when the MPC is expected to order another cut of 0.25 per cent.
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