Fri 22nd Feb, 2008
Which way are interest rates going to go?
With news that the US central bank has decided to cut interest rates by half a percent there is now uncertainty as to what the Bank of England is going to do.
The pressure will be growing however for the Bank of England to follow the US central bank in cutting interest rates.
Rates are now one percent lower in the US than they are in the UK and this is widely believed to be the case because of worries the US central bank has over the US economy as a whole and the chance that it may slide into a full blown recession.
Because of the size of the US economy and the influence it has over other smaller economies there is a chance that if the deepening financial crisis over there could lead to a general downturn in growth across the globe.
This would also badly affect the UK economy since we export a large quantity of our products to the US and if they stopped purchasing them we would also be in trouble.
The news of possible interest rate decreases however will be welcome news many of us who are struggling to meet monthly repayments on our home loans because of the high interest rates at the moment.
If interest rates do come down it will mean anyone on a tracker rate will see their monthly loan repayments also come down. However it might not necessarily lead to an increase in demand for housing because of the uncertainty in the market at the moment.