Lowest Equity Loan RatesVery low equity loan rates
In August 2016, the Bank of England's lowest key interest rates were introduced at an astonishing 0.25%. In order to put this into context, the Bank of England's highest key interest was fixed at 15% in the summer of 1990. Why is the Bank of England's base interest rates important to the house owner?
Basic interest rates are determined by the Monetary Policy Committees of the Monetary Policy of the United Kingdom. It is an autonomous government body and its board meets every three months. Basic interest is the interest it is willing to repay to other bankers for funds deposited with the deposit.
Naturally, these creditors are adding a spread on the profits and so home owners are accustomed to getting a loan interest given on the basis of the basic interest plus a spread, perhaps 0.5 - 2%. Following the 2008 loan squeeze, many financial institutions discontinued loans on conditions related to the bank's basic interest rates (which were lowered to 0.5%) and instead encourage creditors to take out loans on LIBOR (The London Interbank Offered Rates).
It is the interest rates fixed by the major financial institutions and define the interest rates at which they are willing to borrow funds from each other in the near future. On the other hand, thetbank of England uses its key interest rates to control credit and monetary aggregates. After 2008, however, the economies have experienced difficulties and interest rates are already very low, limiting the Bank's capacity to support them.
Naturally, during this period of low interest rates and low levels of joblessness, as well as a rising populace and housing demands, especially in the Southeast, housing costs have risen decisively. However, the bank's capacity to exert economic restraint appears to be limited as interest rates are now at 0.25%, and some say that merely generating more and more cash threatens to create an unlimited finance disaster in the near-term.