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MPC Maintains Interest Rates

By: Mark Dawson.

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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.

Resulting from the MPC's decision, it is probable that consumers do not find any increased pressures on their finances. And during the current economic climate, at least homeowners should find that their mortgage repayments do not increase. Additionally, people could also discover that their is no increased pressure in managing other monetary demands - such as personal loans, credit and store cards and utility bills.

Barclays Stockbrokers equity strategist Henk Potts stated: "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.

Director general at the Council of Mortgage Lenders (CML), Michael Cougan 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 they had missed a chance to cut the base rate. He also added that although the mortgage and housing markets are likely to face challenges for the rest of the year, most mortgage payers are "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 that are concerned about their ability to manage their finances as the year progresses now might be a good time to take out a cheap loan. By choosing this type of loan, it is likely that borrowers can supplement their spending effectively and help with making major purchases.

In research carried out by the CML last month it was indicated that an more homeowners are taking out mortgage products which track any changes to the base rate of interest. In February some 35 per cent of consumers were shown to be taking out tracker rate mortgages, an increase of 21 per cent compared to the 14 per cent recorded during the same month in 2007.

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

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MPC Maintains Interest Rates

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MPC Maintains Interest Rates

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