BUSINESS leaders and professionals in Merseyside have welcomed the decision by Bank of England policymakers to slash interest rates to a 53-year low.
The shock 1.5% cut by the Bank of England’s Monetary Policy Committee (MPC) is the biggest move since March, 1981, and brings rates to 3% – last seen in 1955.
Stock markets were stunned by the size of the cut and experts predicted rates could reach an all-time low of 1.5% by mid-2009 as the Bank desperately bids to ward off a prolonged slump.
But a host of lenders – including the UK’s biggest building society, Nationwide – rushed to withdraw their tracker deals from the market.
Borrowers on standard variable rate mortgages will see average monthly payments on a £150,000 mortgage fall by around £138 – if the cut is passed on in full.
But lenders shaken by banking turmoil have been reluctant to pass on cuts in full as interbank lending rates – key in pricing fixed-rate deals – remain high.
Chancellor Alistair Darling insisted it was “essential” that banks passed the cut on to customers.
In Merseyside, the move was described as “bold”, but there was concern about whether or not lenders would pass it on and also worries about what such drastic action signified about the state of the UK economy.
Neil Sturmey, managing partner of accountants Grant Thornton in Liverpool, said: “The extent of the cut is certainly welcome news. This is a bold move and may help bring LIBOR back into line with the official cost of borrowing.
“Without that happening, the old problems remain of how much of the cut the banks will pass on to the consumer and the general lack of credit within the system.”
Chris Aitken, senior financial planning director at stockbroking and fund management firm Rensburg Sheppards, added: “The unprecedented 1.5% market cut by the Bank of England was clearly significantly more than the market was expecting, which in isolation is good; however, it may be an indication that the economy’s problems are worse than imagined.
“One would feel that the Monetary Policy Committee had misjudged the severity of the recession and was thus behind the curve, and this move has been made to play catch-up.”
Brian Clark, senior partner at accountants Pricewaterhouse Coopers in Liverpool, said: “The Bank of England Monetary Policy Committee definitely moved in the right direction by cutting interest rates to 3%.
“This should boost business and consumer confidence and help ensure the direction of travel of the UK economy is towards an earlier recovery rather than a deep and prolonged recession.”
Andrew Semple, Warrington-based spokesman for the Engineering Employers Federation, said the cut would be welcomed by manufacturers across the region.
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