Interest rate fall good news for homeowners

Illustrated rainbow pride flag on a pink background.

LGBT homeowners will benefit from another reduction in interest rates by the Bank of England, the second in three months.

The Bank’s Monetary Policy Committee (MPC) voted to reduce rates by a quarter of one percent to 5.25 per cent.

An average £100,000 mortgage will only reduce by £16 and not all mortgage holders will see a reduction.

The US Federal reserve last month slashed rates by a total of 1.25 per cent.

The Bank of England said in a statement accompanying its decision:

“The prospects for output growth abroad have deteriorated and the disruption to global financial markets has continued.

“In the UK, credit conditions for households and businesses are tightening. Consumer spending growth appears to have eased.

“Although the substantial fall in the sterling exchange rate is likely to promote re-balancing of total demand, output growth has moderated to around its historical average rate and business surveys suggest that further slowing is in prospect.

“These developments pose downside risks to the outlook for inflation.”

It added that while inflationary pressures are an immediate concern, the Consumer Prices Index was set to come down later in the year.

“CPI inflation, at 2.1% in December, was close to the 2% target, but higher energy and food prices are expected to raise inflation, possibly quite sharply, in the coming months.

“The lower level of sterling will boost import costs. The impact on inflation should begin to fade later in the year, but measures of inflation expectations are currently elevated.”

It added: “The Committee needs to balance the risk that a sharp slowing in activity pulls inflation below the target in the medium term against the risk that elevated inflation expectations keep inflation above target.

“Against that background, the Committee judged that a reduction in Bank Rate of 0.25 percentage points to 5.25% was necessary to meet the 2% target for CPI inflation in the medium term.”