Mortgage rate falls to 0.5%
In my short absence The Bank of England has cut the borrowing rate to a new historic low of just 0.5%. To put this in perspective the rate in October was 5%.
While no-one will be complaining about saving a few pennies (apart from those on fixed rates…who will be putting their finger in their ears and praying the rate goes back up asap) is this really the way forward for the mortgage lending sector? When you penalise the industry they will automatically charge their customers more which will defeat the purpose. Mortgage holders are also savers, consumers and voters…
Apart from the fact that everyone will be saving their money (with hopeless interest rates) rather than rushing out and spending it ‘cos its free money!’, the medium term health of this industry is going to be in putting money into the finance sector and regulating it like never before.
This is only a temporary measure, what happens when the recession deepens in 6 months time and lenders HAVE to raise the rate to keep going? How are people going to react to that? Thats when you get a proper 1970s recession with mass unemployment, riots, tax exiles and rising crime.
When is the general Election Gordon? it would be incredibly cynical to push the UK into an recession just to keep some hope of another term in Government.
The BOE and the government will both say that the BOE has the final say in mortgage rates but look what a mess the economy is in after just few years of their control! The FSA has promised to get their act together and the BOE should do the same. Lowering the mortgage rate is fine but the long term plan should be for more than ‘boom and bust’, quick fix measures! As a homeowner you know there is nothing for free, you would just like leadership rather than tuck shop politics…