In December, the Bank of England's Monetary Policy Committee determined necessary and voted to lower the official Bank Rate that is paid 0.25 points. This would drop the effective rate to just 5.5%. Yet, lenders have not followed suit.
The Bank of England's rate reduction was meant to spur growth, that while doing well over the last two years, has slowed somewhat. From information gathered in the November Inflation Report, consumers have slowed spending which has dropped projections for growth considerably.
Today, with these figures released by lenders, 18 mortgage lenders out of the country's 103 have failed to make the cut. Another 16 of those lenders have only reduced their rates a fraction of what reduction the Bank of England made. For example, Skipton and Principality each have no announcement pending of rate reductions. Other lenders have cut their rates, but only by 0.15 percent or less.
With this news coming just as the MPC plans to hold a two day interest rate setting meeting, it will play a role in the actions that the MPC takes. Many economists believe that the MPC will reduce rates again; dropping as low as 5.25 percent soon, though there is speculation as to when that may happen. It may come as soon as February, some believe.
There is little doubt that such rates will be happily accepted by homeowners who are the most hard pressed with current rates.
The rate cut in December was designed to curb inflation and to meet the target of 2 percent. CPI inflation was 2.1 percent through the month of October. The effect of the rise in inflation has been seen in terms of higher costs for energy and food prices.