Another 0.25% off the base rate

Homeowners and industry professionals were relieved earlier this week to hear that the Bank of England was cutting the base rate for the third time in recent months.

The 0.25% base rate cut will take the interest rate down from 5.25% to 5%, with the Bank of England hoping that increased affordability amongst homeowners will help to boost the economy.

The announcement came after the Monetary Policy Committee meeting on Thursday, and a number of banks have already passed on the rate cut to borrowers, reducing their standard variable rates by the full 0.25%, although there are also lenders that have increased their mortgage rates despite the rate cut.

One industry official said: ‘This cut was badly needed. Higher interbank and mortgage lending rates are dampening investment, consumer demand and economic activity, and today’s cut should ease conditions a little. Weaker economic growth through the year ahead will help keep inflation under control over the longer term, so a reduction in rates now does not compromise the Bank’s stance on inflation.’

In the meantime experts are now trying to work out when the next rate cut will come.

One economist said: ‘We forecast the next 25 basis point cut to 4.75% to occur in June or July and anticipate that interest rates will fall to 4.25% by the end of 2008 and to 4.00% in the first quarter of 2009.’