uSwitch.com comments on Base Rate decision

Edited by the Insidemoneytalk editorial team Oct 10, 2008

uSwitch.com comments on the co-ordinated decision between the Bank of England, US Federal Reserve and the European Central Bank, to decrease the base rate by 0.5% to 4.5%

In response to today's co-ordinated decision between the Bank of England, US Federal Reserve and the European Central Bank, to decrease interest rates by 0.5% to 4.5%, Ann Robinson, Director of Consumer Policy at uSwitch.com, the independent price comparison and switching service, comments: "In the wake of the recent financial carnage, the MPC's decision to cut the base rate by 0.5% to 4.5% is welcome news for struggling UK homeowners.

This is the first reduction since April, and many borrowers will be breathing a long awaited sigh of relief.

For those people on a tracker mortgage, it mean a monthly saving of ?44.94 each month totalling ?539.28 a year.

This could be invaluable given the current economic uncertainty.

"However, consumers are still struggling under the weight of rising food and fuel prices, as essential living costs soar at their fastest rate since records began.

The cost of essential bills has increased by an inflation busting 8% over the last 12 months, in comparison to a miserly rise of just 3.4% to the average wage.

People now have less money in their pockets than ever, with household disposable income falling by a staggering 15% in the last 12 months.

It is now at its lowest level since 1997.

"For many homeowners coming to the end of a fixed rate deal, this could be the lifeline they need - but only if lenders pass on the full reduction.

Following recent mortgage rate rises made by some of the major players, borrowers will want this to happen sooner rather than later.

"Unfortunately, mortgage providers are under a great deal of pressure as the Libor (London Interbank Offered Rate at 6.27%) has been sky high for months.

This means that mortgage providers are paying a premium to get their hands on cash to lend.

Until this rate drops, lenders will continue to struggle to offer cheap deals.".