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Don’t hold your breath for loan rate cuts
The Bank of England has cut the base interest rate from 1.5% to 1% and a further rate cut in March is likely, possibly to 0.5%. A rate of 0% at some point in 2009 remains a realistic possibility. This is the lowest ever interest rate and it takes us into unchartered territory. But if you are a borrower, what does it mean to you?
A cut to 1% should increase pressure on personal loan and credit card providers alike to follow suit and offer better deals to new and existing customers. But don’t hold your breath.
Variable rate loans work in much the same way as tracker mortgages but don’t tend to follow the base rate as strictly. Not all variable rate loan providers though will be obliged to pass on the rate cut so it’s important to check how your own loan will be affected.
A more important issue is that the rates applied by loan providers are more directly influenced by the rates at which banks lend to each other, the LIBOR. This, in contrast to the base rate, has remained fairly constant in recent months, and this, coupled with nerves from credit card providers has meant rates on cards have stayed high, or even gone up!
February 12, 2009 at 11:01 am | Loans General Info | No comment
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