What an Interest rate cut means to you and to the Economy

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Well it depends who you are. If you’re a ‘saver’ then it might be bad news because the commercial interest rate of the commercial banks you hold your money with is likely to fall, due to commercial rates often following the Bank of England’s interest rate. However a large proportion of people have switched from holding their savings in commercial banks to instead holding their savings in the stock market on various stocks and shares. This is mainly because the previous interest rate of 0.5% has been that way since 2009.

If you’re an entrepreneur however this might be hugely beneficial for you. Due to banks lowering their interest rates the amount you’d have to pay back in interest will most likely be lowered. This is very good for job creation and good for preventing deflation, which is partially why the BoE has decided to pursue this policy, the UK’s inflation rate has been well below the Monetary Policy Committee’s target of 2% for some time now.

Also if you’re a mortgage owner this is great news, provided you’re on a variable mortgage. This will decrease the monthly payments homeowners have to pay for their mortgage. Given the trouble it takes to get on the housing ladder, this might be great news for first time buyers.

There is also talk that banks may stop lending, which would essentially cause a recession, but the BoE has put together a scheme worth £100bn to stop any chance of that happening.

The Bank Of England has also revised down it’s estimates for the next few years, in terms of growth, which was expected but has not predicted a “DIY recession” as David Cameron, the former Prime Minister, had expected.

The UK’s economic future looks more challenging today than it did before June the 24th but with challenge comes triumph and I believe with the right leadership and determination the United Kingdom can deal with the short term bumps while we get closer to the long term gains. Only time will tell if we have the right leaders.