The Bank of England decided last week to hold interest rates at 5%. The Money Policy Committee (MPC) wasn’t in the position to reduce rates (as much as it may have liked to) because inflation has jumped from 3.8% to 4.4% and food prices have rocketed by 13.7% compared to last year.
As the government struggles to bring inflation under control and down to its 2% per cent target those hoping to see a rate cut shouldn’t expect to see one in the near future, certainly not in the next few weeks. A cut in base rate would have help many stressed home owners with their repayments as many mortgage lenders would have reduced the rates they charge.
It isn’t all bad news though; oil prices have come down recently, helping to ease inflation slightly and bring a sigh of relief to motorists. Many supermarkets have offered incentives consumers can take advantage of to further save them money, by spending a certain level on food shopping, discounts are given on fuel.
Looking more long term inflation is expected to slow in the next few months as economic slowdown takes full effect which will allow the MPC to bring in much welcome cuts, which are predicted to drop as low as 4.25% as we move into 2009.
The consumer price index (CPI) is the official measure for inflation which rose by 0.6% from 3.8% last month. This monthly jump is the highest on record as is the 4.4% current inflation rate, the highest rate since it was first used in 1997.
The main culprit for the hike in inflation is food prices which have jumped by 13.7% in the last year. Along with energy costs, these two factors have fuelled these massive jumps which look to set to break a 5% inflation rate over the coming months despite the recent drop in oil prices.
The MPC will be making its future decisions carefully as the effect a cut or possible rise in base rate will affect the economy more than ever in its history. The MPC is appointed by the Bank of England to keep inflation close to the 2% target however will consider the effect of a change in base rate will have before making its monthly committee decision. A rise could be on the cards although this would bring further misery to millions of home owners or they may decide to hold the base rate at 5% if their research shows an economic slowdown will take effect in the next couple of months.
Mortgage rates are improving all the time as mortgage lenders return to the market. Remortgages taking out through a mortgage broker can offer you whole market advice ensuring you can make an informed decision and aren’t missing out on the best deal.
