BSA: Rate cuts an ‘assault’ on savers

| March 4, 2009 | 0 Comments
Rate cuts an 'assault' on savers

Further cuts to the Bank of England’s base rate (BBR) would be an ‘assault’ on both savers and borrowers, the Building Societies Association (BSA) said this week.

The BBR is already at an all time low of 1%, and analysts widely expect the central bank to announce additional cuts later this week.

However, the BSA warned that cutting the BBR again would be a step in the wrong direction and would have little benefit for the UK economy.

Savers would lose out because of lower returns on their savings.

Lending institutions, meanwhile, would be left with little money available for lending due to lower saving inflows.

Adrian Coles, BSA director general, said: “If the Bank of England wishes to make a contribution to a recovery in the housing and mortgage markets, it should not cut interest rates this month.

“We need to encourage an increase in the flow of funds into the mortgage market, not take steps that would further restrict that flow.”

He added: “Quantitative easing would be much preferable to a further rate reduction, as it would increase the flow of funds in the economy, and make it easier for deposit-takers to attract funds.”

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