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Mortgages -
Interest rate cut to 5.25% - 07/02/2008
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The Bank of England gave householders currently on variable rate mortgages some good news today, by cutting the base rate by 0.25 per cent to 5.25 per cent.
An apparently cooling housing market - along with borrowers having a harder time finding a mortgage due to the credit crunch - is thought to have provided the impetus for the move.
However, inflation worries - with energy firms hiking bills and food prices on the up recently - appear to have stopped the Bank from taking more drastic action with a half-a-point cut.
The US Federal Reserve, faced with what appears to be a national housing crisis, slashed rates by 0.75 per cent in an emergency cut earlier this months.
It is hoped, nevertheless, that cheaper borrowing will help home sales in the UK over the next month.
"The Committee needs to balance the risk that a sharp slowing in activity pulls inflation below target in the medium-term against the risk that elevated inflation expectations keep inflation above target," the Bank said in a statement.
Speaking to news agency Reuters, economist at French bank BNP Paribas Alan Clarke commented: "Ultimately what they're saying is that some degree of slowdown in the economy is desirable to get inflation down over the medium term, so don't expect us to cut like bandits like the Federal Reserve."
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