Posted by Allison on 16 October 2009, 15:19
On the Bank of England website, you can read about all the different interest rates that have been in operation since the beginning of 1975.
Now obviously the Bank of England base rate has reached a historically low level since the recession first got underway. At the present time it is set at just 0.5%. If you glance through that list you will see that the highest rate was a whopping 17%, back in mid November 1979. Having a rate of just 0.5% must have seemed unthinkable to anyone trying to pay a mortgage and keep their house going back then.
But of course that is the situation we find ourselves in right now. The recession has led to unprecedented events taking place. A pound weaker than we have seen in a long time struggles to gain good exchange rates on the currency converters. The job situation is understandably extremely difficult. And country after country is feeling the pinch thanks to the sub-prime mortgage situation that kicked the whole recession off in the first place.
Low interest rates are lovely if you have a mortgage to pay and you want low monthly payments. They’re not so good if you are a saver and you are mortgage free though. But it would seem from the latest news reports circulating that we are not going to see high interest rates in this country for a long time to come.
Unbelievably the last time the Bank of England set a double digit base rate was way back in September 1991, when a rate of 10.38% was in force. Since May 1992 we have been in single digits and it has not gone anywhere near the figure of September 1991 ever since.
A new report on the Sky News website indicates that we will not see higher figures at all for a long time. We are likely to go through the whole of 2010 with the base rate stuck at 0.5%.
So it isn’t good news for savers but things have to stay this way in order to help the economy get back to something approaching normal after the devastating recession. Clearly the worse a recession is the longer it will take to recover from it. And this is how the current situation seems to be playing out.
As we have seen above, anyone who has a mortgage will be delighted at this news. It means their payments should be kept relatively low for the foreseeable future. Savers are the ones who will lose out in this climate, but for one to get a good deal the other must necessarily get a bad one. It is simply the way the world works.
But there have also been suggestions that the pound could also slip once again and end up with an exchange rate that is even worse than the ones we saw some months ago. If it hasn’t reached rock bottom yet, it’s right to wonder where that rock bottom is. 2010 could turn out to be an even worse year for the pound than 2009 was.
So we shall have to wait and see how long it takes for the 0.5% interest rate to have the desired effect and help Britain back to something approaching normality. It could be a long wait if all the stories are true.