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Interest Rates

It looks likely that the MPC will vote to keep interest rates unchanged in their upcoming meeting to decide the Bank of England base rate, as the amount of consumer credit grew at its slowest rate since April during the month of February, and as such the need for a rate increase is somewhat reduced.

Many economists believe that the basic rate of interest will be held unchanged at 4.75% following the meeting to decide it next Thursday. Due to the upcoming general election, the announcement of the decision may be delayed until after the elections have taken place, if a date of May 5th is used as expected for the election, the decision will be announced on May 9th.

The figures released by the Bank of England show that the amount of consumer credit being provided is slowing, and the markets are beginning to stabilise. The amount of consumer credit had grown by £1.69bn in February, which is short of the average rise for the previous six-month period of 2bn. Mortgage lending performed better than had been forecast in January during the month of February, with a rise of £7.22bn – however this is still less than the previous six-month average.

This slowing down of the credit market is good news in many ways for borrowers, as it looks as though interest rates will have to remain unchanged in the short term, and with many economists believing that rates have reached a peak for this cycle, future reductions in the rates look likely.

The Bank of England will undoubtedly be keeping a close eye on both the levels of consumer credit and the levels of spending, there has been a slowdown in both of these areas over recent months, although there is still growth occurring. If it believes that the consumer spending needs encouraging for the benefit of the economy then it will instigate a drop in the rates of interest, however there are many factors to be taken into account and predicting any changes is difficult.

In the short term it appears as though the stability is to be maintained and the rates should remain unchanged, which will be good news for all borrowers.