The Bank of England has today cut interest rates by a further 1%. This means that the base rate of interest is now at 2%, which is the lowest level it has been since 1951.
So, for anybody who is on a base rate tracker/discounted mortgage then you will start to see even further reductions in the amount of interest you are paying on your mortgages.
Let’s hope that the banks also apply the 1% reduction to their standard variable rates as well, passing on the benefit to a much wider audience.
Those who won’t benefit from this interest rate reduction are the ones who are on fixed rate deals and, of course, the savers who are debt free. Any interest rate deduction for savers means they earn less on their money.
So, for the cash rich people who used to benefit from the higher rates of interest it could well mean the start of moving their savings overseas, to countries where the rates are higher!
The drop of 1% was widely anticipated and, again, is another attempt by the Bank of England to try to kick start the economy.
So will the interest rate reduction benefit you and get you spending more to kick start the economy? Personally, I think there will continue to be a lot of caution, especially with the ever gloomy news coming out where more and more people are being laid off, business is struggling and property prices continue to fall.
PricewaterhouseCoopers has today warned that of all the major economies in the world Britain will perform the worst in 2009!
Let’s hope not and that things start to turn around sooner rather than later.
