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Interesting News
Interesting News
It was generally agreed that it was only a matter of time before bank lending interest rates fell even further, but most financial analysts were caught off guard by the Bank of England’s massive cut in rates this week.
In the biggest cut the Bank of England has ever made, the UK’s Central Bank took 1.5% off its lending rate, bringing interest rates to just 3%, the lowest level the UK has seen since 1954. Other European central banks, although less generous in their interest rate cuts, also followed suit. The European Central Bank (ECB), supervisor of the eurozone, reduced rates by 0.5%, leaving ECB interest at 3.25%, slightly higher than the UK equivalent – unusual since the Bank of England lending rate has traditionally been above the ECB. The Czech, Danish and Swiss central banks also dropped their lending rates.
Interest rate cuts are generally used to halt rising inflation and to help inject much-needed funds into an economy. With further interest rate reductions forecast in the near future – analysts expect the Bank of England to drop rates to 2% by April and the ECB has hinted at further cuts before the end of the year – many people with mortgages and savings accounts are wondering just where this leaves them.
While many savers have seen banks reduce the interest rate offered on savings accounts, comparatively few mortgage holders have seen significant falls in their monthly mortgage payments. Research has found that after the previous interest rate cut in the UK, only 50% of banks actually cut their variable rates.
“This is definitely a time of uncertainty for the consumer when it comes to loans and savings,” comments Ken Thorkildsen, Director of Obelisk Private Finance, “and more than ever, it’s a case of being aware of what’s on the market and shopping around for the best deals.”
In the light of recent interest rate cuts, many banks are starting to remove their fixed rate savings products so now is the time to invest your savings in a high-interest account – if you can find one. The same is also true of mortgage loans – if you have the option to remortgage then now is a good time to do so. “Investors need to be very aware of current mortgage and savings products at the moment,” says Ken, “to ensure your money is working as hard as possible and bringing you the best possible returns.”
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