Business leaders comment on UK interest rates cut

bank-of-englandUK interest rates have been cut down from 0.5% to 0.25% and the Bank of England has signalled they could go lower if the economy worsens.

Economic data since the EU Referendum has been poor, on services, manufacturing and construction.

A lot of people are fearing Britain could be facing a recession.

The last time interest rates were cut was in 2009 when the banks were battling the recession that had been caused by the financial crisis.

Interest rates are already very low so another cut might not have a huge effect. Broadly, interest rate cuts are good for people with mortgages but not very good for savers.

Business Leaders share their thoughts on the new interest rates and the impact this will have.

Laith Khalaf, Senior Analyst, Hargreaves Lansdown:

“The nightmare for savers continues, and they now face a lost decade of returns on their cash. If anything things are getting worse, not just because savings rates will fall, but because inflation is forecast to rise, eroding the buying power of cash in the bank.

“Central bank policy presents a choice for savers of taking more risk, or simply accepting lower returns and having to stash away more money to meet financial goals. Given the deteriorating outlook for earnings, the latter option looks increasingly challenging.

“The stock market remains the only game in town when it comes to generating an income, and today’s decision reinforces that fact once more. Those moving up the risk spectrum must be willing to take a longer term view however because of the volatility of share prices.

“Today’s decision is a vote of no confidence in the UK economy and sets the scene for low interest rates for years to come. Savers who have been waiting for higher rates for so long must now consider whether to keep chasing the pot of gold at the end of the rainbow.”

Paul Bumford, Financial Services Director at Andrews Property Group:

“The likely knock-on effect of the Bank of England’s announcement, which will see mortgage rates reduce, is just one route to getting on the property ladder – simply, there’s never been a better time to buy.

“Whilst reduced mortgage rates will see the market enjoy a positive bounce as a consequence, once the headlines have faded we have to deal with reality.  I’m certainly not suggesting that a cut to interest rates isn’t a good thing, but I think it should be couched within reason. 

“Most lenders are unlikely to significantly, if at all, alter their Standard Variable Rates (SVR); fixed rates, meanwhile, may see some initial downward movement; whilst it’s in the tracker mortgage market where the greatest gains are to be made – assuming there are no collar exemptions in place whereby the rate cannot drop below a certain point. 

“But does that leave us in a vastly different place to where we currently find ourselves today?  I’d argue not, but it’s not such a bad place to be. Simply, there has never been a cheaper time to access money, nor has there been an easier time to get a mortgage, so long as – and this is the crux – the applicant ticks all the boxes.”