19 Sep

CBI in rate cut call

CBI in rate cut call

Employers federation the Confederation of British Industry (CBI) has called for the Bank of England to instigate an interest rate cut of half a per cent.

CBI chairman Richard Lambert said the UK was not heading for a 1990s recession and any economic shrinkage would be "shallow" and short-lived.

However, he said, a cut in the base rate to 4.5 per cent should be instigated in November, with the downturn giving the monetary policy committee (MPC) "leeway" to cut rates.

Such a view was held by MPC member David Blanchflower, who voted for a 0.5 per cent cut in rates this month, only for the other eight members to support keeping the rate at five per cent.

If the CBI call is heeded, this could help significantly lower the cost of mortgages.

Research by insurance firm Legal & General has revealed that more people are now taking out variable rate mortgages.

It said this week that in the last quarter 35 per cent of residential buyers took out variable mortgages, compared to 24 per cent in the previous quarter.

The study also found that such deals accounted for 55 per cent of buy-to-let mortgages.

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