The Bank Rete setting committee of the Bank Of England decided to reduce the rate yesterday to 5.5%. Recent news supported the view that the economy may slow significantly in the future if the bank rate had remained unchanged.
Inflationary pressures do exist with food and fuel both having risen but it would seem the committee considered the risk of recession was threatening.

It is reported that up to 1.4 million homeowners will be coming off their fixed rate mortgages next year and many might have found the change in rates unmanageable. The cut is bound to be helpful to them and other mortgage holders. It may reduce some credit card and loan rates which will help most consumers but the main intention of this cut is very likely to help the high street shops and other businesses.

There have been many signs that consumer spending is slowing. Whether this rate cut will reverse that trend remains to be seen. The shock of realising how overloaded with debt they are, having suffered when the rates increased earlier this year may well leave consumers feeling they have reached a point where they feel they have quite enough debt.
Once you have had a scare it tends to make you more cautious in the future and the prospect of houses not being worth as much as we had hoped will make us all feel a little less wealthy in the coming year.

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