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Inflation could help secured loans rates to fall

Inflation could help secured loans rates to fall

Category: Loans

Updated: 26/11/2008
First Published: 20/11/2008

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Falling inflation could allow the Bank of England to introduce further rate cuts, it has been observed.

Paul Dales, UK economist for Capital Economics, noted that in the past the Bank has had to balance a threat of recession with a high rate of inflation.

But this week the Office for National Statistics revealed that the consumer prices index - the government's official measure - rate of inflation was at 4.5 per cent.

This 0.7 per cent drop compared to the previous month allows the Bank to consider further base rate cuts, Mr Dales suggested, something that could lead to lower secured loans rates.

He said: "Now if you have got both forces going in different directions it is a lot easier for the Bank to react and to make a judgement on how far rates need to fall."

Minutes of the Bank's monetary policy committee meeting revealed that the decision to reduce rates by 1.5 per cent was unanimous.

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