The last base rate increase was made effective in July 2007. Now, after five months, the Bank of England has decided to cut the interest rate by 0.25%, bringing it down to 5.5%. The rate cut was a much needed relief for the borrowers. It is also intended that the cut in base rate will boost the slowing economy of the nation. The monetary policy committee of the Bank of England reviews interest rate every month and takes stock of the financial situation in the country.
In the year 2006, the Bank of England increased base rate two times – once in August and then in November. On both occasions, the interest rate was increased by 0.25%. The Bank increased its base rate three times in the year 2007 – once in January, then in May and July. Each time the base rate was increased by 0.25%. However, in the beginning of December, the Bank reduced the base rate by 0.25%. The interest rate review for the last more than two years reveal that it was never cut down except for this December.
Just prior to the December cut, the Council of Mortgage Lenders warned that lenders would not be able to meet the mortgage requirements in the year 2008 if the current credit conditions continued. As per an estimate by the financial services authority, at least 1.4 million short-term fixed- rate mortgages will come to an end in the year 2008.
The decision by the Bank of England to cut the interest rate in December was the first since August 2005. It came at a time when many Central Banks from different nations are trying to fight the risk of higher inflation and the global economic impact of the credit squeeze that originated from the U.S. soil.
In the year 2006, the Bank of England increased base rate two times – once in August and then in November. On both occasions, the interest rate was increased by 0.25%. The Bank increased its base rate three times in the year 2007 – once in January, then in May and July. Each time the base rate was increased by 0.25%. However, in the beginning of December, the Bank reduced the base rate by 0.25%. The interest rate review for the last more than two years reveal that it was never cut down except for this December.
Just prior to the December cut, the Council of Mortgage Lenders warned that lenders would not be able to meet the mortgage requirements in the year 2008 if the current credit conditions continued. As per an estimate by the financial services authority, at least 1.4 million short-term fixed- rate mortgages will come to an end in the year 2008.
The decision by the Bank of England to cut the interest rate in December was the first since August 2005. It came at a time when many Central Banks from different nations are trying to fight the risk of higher inflation and the global economic impact of the credit squeeze that originated from the U.S. soil.
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