Building Societies comment on rate cuts

Commenting on the announcement by the Bank of England to cut the Bank Rate by 0.5 percentage points to 4.5%, Adrian Coles, Director-General of the BSA said:

“The BSA welcomes the MPC’s decision to cut the Bank Rate by 0.5 percentage points to 4.5%. The outlook for the economy has deteriorated considerably in recent months, activity in the housing market has stalled, and house prices have fallen.

“This reduction in Bank Rate will provide some support to the housing market because it will help those borrowers on variable rates. However, new fixed rate deals and those linked to money market rates will not necessarily fall because they are determined in the money markets rather than directly by the Bank Rate.

“Although today’s news will clearly help those with repayment difficulties, borrowers who still think they might encounter problems repaying their mortgage should get in touch with their lender as soon as possible. At their building society, borrowers will find a sympathetic response and help in getting their finances sorted.”

On the savings side, Mr. Coles said:- “Building societies have attracted record levels of savings since the disruptions in financial markets last year. In the twelve months to the end of August this year, building societies attracted £18.5billion in net savings, compared to £9.7 billion in the same period a year earlier.

“These figures reflect the current heightened economic uncertainty and the recent volatility of stock prices, but also building societies’ competitive rates of interest and reputation for safety and trust. Despite this cut in Bank Rate, these factors will continue to draw savings into building societies in coming months.”