Bad news for loans if interest rates are not cut for two years

The news that the Bank of England may rule out a further cut in UK interest rates for another two years, is bad news for those either with a personal loan, or who are considering taking out a loan in the near future.

With inflation set to rise to 3pc over the next few months, and then projected to remain high until 2010, the BoE is going to be hampered in its ability to reduce interest rates.

Home owners facing higher mortgage costs and those with personal loans, are going to feel the pinch, just as the cost of living rises further. You should only take out a loan if you really need it, and should take considerable care of your finances if your loan is for debt consolidation purposes.

With this gloomy forecast from the BoE yesterday, it was interesting to see that Prime Minister Gordon Brown has stepped in to try and reassure people that UK interest rate cuts are still on the cards. Whether political pressure can overcome BoE caution, remains to be seen, however it will be those with mortgages and personal loans who will pay the price.

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