While the Bank of England hasn’t done so yet, the writing is on the wall – the base rate may drop by 0.25 percentage points by the end of the year, bringing cheaper loans.
Scuttlebutt is that the Bank’s Monetary Policy Committee will make the change by December, and the rate could remain unchanged through 2016, bringing traditional lending down in cost for any loans that use the base rate. This will exclude payday loan providers, but anyone looking for a loan from a bank or a building society will find it much less expensive to repay a loan due to lowered interest rates.
The downside is, of course, that the nation’s savers are taking it on the chin once again. Still, with cash being so hard to come by, few people have the spare money to put into a savings product at the end of the month – in fact, all too many Brits have had to take out short term loans to make ends meet on more than one occasion, either because it’s an emergency situation that can’t wait or because their credit rating is too low.
The fact that many payday advance lenders provide no credit check loans is part of their popularity – with so many people under the gun financially due to jobs losses or wage freezes, bad debts have rocketed. Many people have excessive credit card debts, making them a poor credit risk for a traditional loan, leaving them no choice to turn to a payday loan provider and their often exorbitant interest rates.
Still, there is a lot of optimism surrounding the news that the MPC may cut the base rate even further in the hopes that it will increase access to credit for those in need. Many banks and building societies have already agreed to provide low-cost mortgages and business loans through the Bank of England’s Funding for Lending scheme, so anything’s possible – perhaps the high street will stop causing community-wide ulcers and begin lending to those in need once more.