| The Bank of England's monetary policy committee | | | | consumer spending during the course of 2008." |
| (MPC) has chosen to lower interest rates for the | | | | However, the Rics economist added that although it |
| remainder of December, it has emerged. | | | | would be wrong for homeowners to "ignore the |
| At its monthly meeting in London today (December | | | | inflation risk", many people should be able to cope with |
| 6th), the MPC voted to reduce the base rate of | | | | "the sharp jump in food and oil prices". Mr Rubinsohn |
| interest attached to personal loans, credit cards and | | | | added that the institution expects the MPC to cut rates |
| other borrowing products by a quarter percentage | | | | again in the early stages of 2008. |
| point to 5.5 per cent. This is the first time that the | | | | Stephen Leonard, director of mortgages for Alliance & |
| committee has cut rates since July 2005. According to | | | | Leicester, added that today's decision "is excellent |
| the body, the decision was taken due to slowing | | | | news" for all homeowners, especially those who are |
| economic growth, deterioration in the wider financial | | | | due to find their short-term fixed-rate deals are set to |
| markets and a tightening in the supply of loans and | | | | expire. As a result of the move, consumers may find |
| other types of credit to both households and | | | | that their ability to make payments on mortgages, |
| businesses. However, as a result of the | | | | loans and other commitments is not under as much |
| announcement, a number of consumers could find that | | | | pressure following the Bank's previous moves to |
| pressure on their spending will lessen during the coming | | | | increase the base rate five times since August 2006. |
| months as charges on borrowing such as personal | | | | The director added that such moves could also help |
| loans fall. | | | | prospective first-time buyers to get on to the property |
| Meanwhile, the Bank reported that inflation on the | | | | ladder as mortgages will become more affordable. He |
| consumer price index stood at 2.1 per cent over the | | | | said: "Having enjoyed historically low fixed rates, this |
| course of October. It was suggested that increased | | | | move to reduce the cost of borrowing will be a |
| food and energy prices are set to keep inflationary | | | | welcome one." |
| levels above target in the coming months, which in turn | | | | As a result of today's decrease, now could be an ideal |
| could impact upon people's ability to service other | | | | time for those consumers who are currently struggling |
| areas of their finances such as loans, mortgages and | | | | to handle their finances to apply for a loan. In taking out |
| credit cards. | | | | a personal loan, many people may find that it helps |
| Commenting on the MPC decision, Simon Rubinsohn, | | | | them to manage their money. According to Lloyds |
| chief economist for the Royal Institution of Chartered | | | | TSB's recent consumer barometer, a record 73 per |
| Surveyors (Rics), said: "Today's rate cut will provide | | | | cent of Britons believe that, in general, costs have |
| some much needed relief for the 1.4 million | | | | increased over the last 12 months. Rises in mortgage |
| homeowners who are due to refinance their | | | | payments, food prices and utility bills were reported to |
| mortgages over the next year or so. Higher money | | | | have taken place over the course of this year, with a |
| market rates resulting from the credit crunch | | | | cheap loan being one possible way to meet such |
| threatened to lift the monthly out-goings for many of | | | | expenses in the coming months. |
| these borrowers which in turn could further crimp | | | | |