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Mervyn King hints at 0.5% rate cut.
The governor of the Bank of England Mervyn King has stated that interest rates would probably need to fall by at least 0.5% in 2008 taking the base rate down to 5.25%. Ordinarily under these circumstances lenders would react in a positive manner by issuing extremely competitive mortgage deals, but indications are that this may not be the case.
With banks becoming increasingly cautious as a consequence of the recent credit crunch they are becoming less inclined to offer such competitive deals. It appears that in order to protect themselves in the current climate many lenders will widen their margins. This is likely to be the case particularly with lenders whose book includes adverse lending as their risk exposure is greater.
