Are the rate cuts worthwhile?

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Are the rate cuts worthwhile?

Post  DanAronG on Tue Jan 13, 2009 2:22 pm

On Thursday last week the Bank of England chose to cut the base rate by a further half a percent to an all time low of 1.5%.

All those on tracker rates without collars will once again benefit from the cuts. If your lender passes on the full half percent cut, a mortgage of 150,000 would see monthly payments fall by over 60.

However it is unlikely to have too much of an effect on new mortgage loan figures and as such is unlikely to provide much stimulus for new homeowners in the struggling housing market.

Savers will not be so happy to hear of the rate reduction as this cut is also likely to be passed on to them via reduced returns on their savings.

This leads one to ponder the effectiveness of such a decision. It isn't likely to help the housing market, new mortgage rates aren't likely to improve, savers are suffering and the regular rate cuts adversely affect the Pound and reduce confidence in the economy in general. Aside from the increase in disposable income for those already on tracker rates, it is questionable as to how this helps the economy at all.

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