Inflation puts a hold on further interest rate cuts
Published on : 13/02/2008
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Interest rates are unlikely to fall again in the near future, thanks to rising inflationary pressures in the economy, one expert warned this week.
Katie Tucker, technical manager for financial advisers John Charcol, explained that high fuel and utility prices are pushing up on inflation, making it unlikely that the Bank of England will risk accelerating this trend by cutting rates again.
Earlier this month, the Monetary Policy Committee (MPC) reduced its base rate to 5.25 per cent, with many major mortgage providers announcing that day that they would reflect the change in their standard variable rates (SVR).
However, Ms Tucker pointed out: "Because of the amount of people on fixed rates, even Bank rate reductions actually only bring immediate relief to less than 45 per cent of homeowners."
She went on, noting that in a period of apparent economic slowdown, more people are choosing to bet on rates coming down further in the future.
"As Bank rate is expected to fall, albeit slowly, trackers are still the preference of the day and mortgages with a droplock facility or no early repayment charges (ERCs) will allow borrowers to switch into a fixed rate should they improve later in the year," she said.
