Interest rate drops 'have helped economy' - buy to let mortgages

13 May 2009

The decision by the Bank of England's monetary policy committee to bring interest rates down to record lows of 0.5 per cent has helped the economy, according to one economic expert.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, agreed that renewed optimism has arrived within the property industry with the base rate being at "virtually zero".

Some people with buy to let mortgages may have found that their monthly repayments have dropped as a result of the interest rate coming down from 5.75 per cent in 2007, which would have given them more disposable income to put back into the economy.

Warning consumers about the consequences of such a low cost of borrowing, Mr Rubinsohn suggested there is "a cost ... in the medium term".

"Interest rates, for one, will go up quite sharply at some point, as soon as the signs of recovery are underway in the economy," he explained.

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