cheap accountants - int rates

The UK base interest rate was recently cut from a historic low of 0.5% to 0.25% to act as a stimulus to support and prop-up the UK economy. This is largely seen to be a direct response to the Brexit outcome and impact this expected to have on the economy. With interest rates already very close to zero is there scope for rates to fall further?

The UK’s base interest rate was reduced to 0.5% all the way back in 2009 and has remained at that level until very recently. During early August this was then reduced further to 0.25% and talk since has speculated or even indicated a strong possibility of further reductions. This was the first movement in the bank rate as determined by the Bank of England during the last seven years. The Bank has also signaled that rates are likely to be cut further should economic conditions worsen. Growth forecasts for the UK economy were cut by the Bank from 2.3% for 2017 to only 0.8% and there is nothing to currently suggest that this forecast won’t be revised down even further.

The Bank of England appeared to cut rates to encourage households to take out further lending and to encourage spending in the economy. Economists are currently predicting that rates will fall further from the current 0.25% to a new ultra-low rate of 0.1%. The UK economy and indeed the World economy has never really recovered from the historic events of 2008 and everything is pointing to one direction only for interest rates and that direction is down.

The UK economy and indeed the World economy have stumbled along a very delicate path during the last seven or eight years with a numbers of factors dampening growth and economic output. These pressures don’t currently show any signs of subsiding in the near future and the Brexit vote has certainly increased the level of uncertainty for the future of the UK economy. It wasn’t long ago that we had Grexit weighing on our minds but this time is certainly actions taken within the UK that appear to be driving the future path of the UK economy.

Only time will tell how low rates will go and for how long. In the meantime enjoy the ultra-low interest rates and the benefit of paying less interest on your home loan.