The Bank of England has today announced a 0.25 per cent reduction in UK interest rates, bringing the cost of borrowing down to 5 per cent.
Bank of England: This reduction comes as the UK economy faces slow growth and the property industry going through a mini-crisis. The cut was widely expected and welcomed by many economists. Further interest rate cuts are now expected later this year, but the Monetary Policy Committee (MPC) still needs to balance4 inflationary pressures and the fragile UK economy amid the credit crisis.
It is predicted that the slowing economy will eventually help to bring down inflation, which is currently half a percentage point over the target of two per cent. Pressure now mounts on lenders to pass on the reduction to borrowers. The High London Interbank Offered Rate (Libor) has meant previous Bank of England interest rates cuts in December 2007 and February 2008 have not been passed on to borrowers and mortgage rates have in fact increased.
Data from the Council of Mortgage Lenders (CML) shows repayments on a variable repayment mortgage of £150,000 should fall £22.98, while on an interest only mortgage, repayments should fall £31.25.
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