There is no doubt that the economy is slowing down. According to the latest statistics the annual rate of growth has slowed to 2.5%, which is the lowest for a number of years.
This slowdown does not necessarily mean that a recession is looming, but it should give the Bank of England some room to make a further cut in interest rates early in May. A 0.25% cut would take the base rate down to 4.75 percent.
A fall in interest rates is good news for borrowers, of course, but the degree by which they benefit depends on the lenders passing on lower interest rates to home owners and those with other personal loans.
Recently some lenders have been reluctant to pass on lower rates as they struggle to rebuild their cash reserves during the credit crunch problems. Under pressure from the Chancellor, lets hope that banks do offer fixed rate and tracker mortgages with lower rates, if the base rate falls soon.
The housing market needs a boost from cheaper mortgages, but it won’t be until the bank liquidity problems subside that property prices will stabilise. It will take more than a small cut in interest rates to restore confidence to the banking system, however at least it’s a step in the right direction.