Insurance News Archive

Rate cut 'could happen this year'

Commercial mortgage holders and property owners could see their finances boosted by the end of the year by a drop in interest rates, it has been suggested.

A 0.1 per cent downward shift in inflation to 1.8 per cent in August has all but removed the chance of rates rising to six per cent, but further confidence that a cut may be on the cards came in Wednesday's release of this month's Monetary Policy Committee (MPC) meeting.

Members of the Bank of England committee voted 9-0 in favour of holding the base rate of interest at 5.75 per cent, the second month in a row that rates have remained the same.

This suggests that the current opinion of the MPC is leaning towards stability, but with the Federal Reserve in the US cutting rates for the first time in four years, it may be that the UK follows suit.

Jonathan Said, chief economist at the Centre for Economics and Business Research, agrees with this analysis, saying: "Our expectation is for a UK rate cut this year, probably in November."

The current uncertainty in the world financial markets is another factor putting pressure on the MPC to cut rates.

Such was the concern over the state of the UK finance sector in the fallout of the US sub-prime collapse that the Bank of England pumped some £10 billion into long-term markets to help stimulate the sector.

21 Sep 2007