- 04
- Sep
The monetary policy committee (MPC) has decided to keep the base rate of inflation at an even five per cent as it attempts to keep inflation under control while encouraging growth.
Following the announcement, which was made at noon today (September 4th), the Fair Investment Company claimed that the group is probably hoping that the recently announced measures to stimulate the housing market will help to encourage buyer activity through tax incentives and investment to help first-time buyers into the market.
The widely publicised raft of measures included the abandonment of stamp duty land tax obligations for properties of a value less than 175,000 pounds. The move came at a time when many analysts had laid criticism on the government for delaying the announcement, which in turn had discouraged low-end buyers from entering the market during the summer months as they waited for the break to come.
For those looking to take advantage of the new measures, taking out a personal loan may prove an effective way to raise the capital for a deposit quickly. Indeed, with the base rate level unchanged, consumers may feel that now is a good time to enter the market.
Meanwhile, the Fair Investment Company also pointed out that keeping interest at its current rate will surely bring some comfort to homeowners who are struggling with repayments. According to independent financial adviser the Motley Fool, consumers should not hold their breath for a cut in interest rates, as the dual threats of inflation and a slowdown make such a move unlikely.
Commenting on the decision, head of personal finance at the group David Kuo said: “The Bank of England has sent a clear signal that it intends to bear down on the fastest rise in the rate of inflation for over a decade. However, the decision by the Bank of England to stand firm in its fight against inflation has opened up prospects of more tax giveaways by the government to soften the impact of the slowing economy. But tax cuts and interest rate reductions are strange bedfellows when inflation is rising. So, homeowners should not bank on a rate cut in the near term.”
He went on to advise that anyone who is currently on a tracker mortgage should look to increase their level of monthly repayment in order to prevent difficulties in the future should rates increase.
Concluding, Mr Kuo reminded consumers that tax giveaways such as the removal of stamp duty can often have an inflationary effect on the economy, which could in the future force the MPC to raise the base rate in an effort to peg back price rises.
For those looking to take advantage of the current rates, taking out a personal loan may be an attractive way to raise the money for a deposit quickly to avoid being hit by any future rises. Doing so now may be of particular interest after recent figures from the Office for National Statistics showed that recent inflationary pressures continued throughout July.
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