The Bank of England cut the base rate yesterday to 0.5%, reaching yet another all time low. .

This is good news for those on a base rate tracker mortgage. But for those (particularly the elderly) who rely on their savings it has brought more hardship. Savers have seen the value of their income depleted over the past year. The government have been encouraged to introduce measures to help those who rely on savings for their income. Although the government have said the pans are to be introduced there is as yet no suggestion as to what form this help will take.

In an effort to stimulate demand the Bank of England is to now introduce “quantitative easing” i.e. creating new money. The initial new tranche of funds will be £75 billion, but the full amount could reach £150b.

It is hoped that the new funding being made available to banks and building societies will then encourage them to lend more in turn.

If you want an explanation of how quantitative easing will boost the economy there is a very good short video from the Financial Times explaining how it all works.

See http://tinyurl.com/cyebhb

This entry was posted on Friday, March 6th, 2009 at 10:04 am and is filed under finance general, interest rates, mortgages. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.