The Bank of England Cut interest rates by a further 0.5% yesterday, they are now at a low of 1%. This new cut signifies the 5th cut since October when the interest rates stood at 5%. This new rate is the lowest level in its history.
The Bank of England is showing signs of desperation in an attempt to get the economy up and running and going forward again. The UK economy is in serious trouble and with a weak pound and a lack of consumer spending this trouble is only set to escalate.
Keeping in mind that in the fourth quarter of the year the economy shrank by 1.5% which is its biggest drop in almost 30 years, you can see why the Bank of England is getting increasingly worried. The longer things take to begin to turn around the more damage that is being done.
With the pound being weak and the economy in a state, unfortunately Britain is problem set fair one of the worse if not the worst of all the big economic powers.
Even though the Bank of England and the government seem to be trying all they can to fend of this recession many lenders are still not passing on the rate cuts and many lenders still have not passed on the last cut and show no signs of doing it.
So on the one hand you have interest rate cuts that are supposed to help consumer spending and get the mortgage market going again, but lenders not passing on the cuts and on the other hand you have the cuts having a negative effect on savers. So one has to ask them self the question, has the constant rate cuts actually helped the economy in the long run or are we just looking for quick fixes which will come back and haunt us in the long run.
Property investors are weary of all the cuts until they can actually see it making a massive difference to them. Some are benefiting from the cuts, but often this benefit is outweighed by the fact that the loan to value required to purchase new properties is still too high for first time buyers and property investors alike.
Last week Nationwide reported the prices that property prices continue to fall at a sustained rate. The fact is that unless the government can find a way to get the lenders to pass on the cuts and to help consumer confidence in general, then the economy is probably in for a bumpy ride or the next year or two and potentially even longer. However, for the astute property investor now is still a good time to buy property, if they tick all the boxes. In fact now is the ideal time to buy.