| Savers will suffer |
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| Written by Editor | |
| Thursday, 05 February 2009 12:50 | |
Policy: While industry bodies welcome the rate cut decision by the MPC and the Sterling appears to be benefiting, savers will not be so happy.
The Bank of England has just cut the base rate of lending to 1%. It is hoped the move will encourage the freeing of credit lines to the UK economy by making the cost of borrowing cheaper. Low interest rates will also see savers lose out as the return they get on their saved money is slashed. "For savers, and pensioners in particular, this latest cut in the base rate is another major blow. While the banks may not pass on the reduction to borrowers, it's a safe bet they will pass it on to the beleaguered saver," says Simon Hodge, an independent financial adviser on Rubii.co.uk. It is feared that this latest cut could in fact make economic matters even worse. "If lenders cannot attract savers, the great thaw in lending that we are all waiting for could be further delayed," says Andrew Montlake, partner, independent mortgage broker, Cobalt Capital.The Bank of England has just cut the base rate of lending to 1%. It is hoped the move will encourage the freeing of credit lines to the UK economy by making the cost of borrowing cheaper. Low interest rates will also see savers lose out as the return they get on their saved money is slashed. "For savers, and pensioners in particular, this latest cut in the base rate is another major blow. While the banks may not pass on the reduction to borrowers, it's a safe bet they will pass it on to the beleaguered saver," says Simon Hodge, an independent financial adviser on Rubii.co.uk. It is feared that this latest cut could in fact make economic matters even worse. "If lenders cannot attract savers, the great thaw in lending that we are all waiting for could be further delayed," says Andrew Montlake, partner, independent mortgage broker, Cobalt Capital. Nick Fullerton, MD of FC Exchange comments: “Although this interest rate decision will not be such good news for savers, it will stand Sterling in good stead to keep the gains it has made over the last few weeks - in particular against the Euro and US Dollar. “The cut is likely to have been priced into the market by traders and rafts of negative data published from the UK, the US and Eurozone are keeping all three equally as weak as the next. Albeit this is not a rally against other currencies, Sterling is certainly standing firm and holding its own”. Ian McCafferty, CBI Chief Economic Adviser said: "This drop in rates should support business confidence and, when added to recent cuts of the past couple of months and the fall in the pound, provides a very significant stimulus to the ailing economy. "But at these very low levels of interest rates, and with the credit mechanism still impaired, it is vital that the Bank swiftly supplements today’s move with direct intervention in the corporate lending markets. 
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