Rate cuts 'will boost economy' - commercial mortgages

11 December 2008

In news that may be relevant to those with commercial mortgages, a financier has predicted that the recent interest rate cuts will help the economy.

Charles Davis, an economist at the Centre for Economic and Business Research (CEBR), said that rate reductions would result in a "non-trivial" amount of money being freed up for many borrowers.

He noted that "large amounts" of people on tracker deals would benefit from the Bank of England's reduction in the base rate, as well as "some" on variable rates.

However, he stated that banks are "remaining very cautious" with their lending choices as they try to "reduce their debt levels and risks on the balance sheet".

The Bank cuts - which resulted in the base rate dropping to two per cent - came following figures from the Office for National Statistics that revealed consumer prices index annual inflation fell to 4.5 per cent in October.

This represented a 0.7 decline from September, mainly driven by a fall in food and fuel costs.