Landlords want rate cuts

Property landlords and estate agents are among those demanding that the Bank of England must cut interest rates to two per cent. It would be especially welcome
news for persons with tracker mortgages.

The Monetary Policy Committee – which sets the rates - meets on Thursday. The Bank has already chopped rates twice since October to their present three per cent.

If rates were further slashed to two per cent it would be the lowest level since 1939, when the Second world war began. A spokesman for the British Chambers of Commerce urged the Bank to continue to cutting rates and suggested that they could fall to one per cent by February next year. Some economists are predicting zero rates next year.

The governor of the Bank of England, Mervyn King, has hinted to homeowners – who are still under enormous pressure despite the recent moves, with many banks and lenders still reluctant to lower the cost and increase their range of their mortgage offers – that another major cut in rates is a real possibility.

King, who has been heavily criticised for what many see as the bank’s dilatory response to the crisis – might be further encouraged into pushing for cuts given the way in which inflation has been in retreat. It’s fallen from 5.2 to 4.5 per cent. Further cuts might be good for mortgagees – and, hopefully, for small businesses – but each time one occurs it adds to the woes of Britain’s savers with saving rates dropping through the floor.

Peter Mandelson – the government’s business boss – has hinted, as has Alistair Darling, the Chancellor, that full-scale nationalisation of the banking system is an option if lenders continue to be laggardly in passing on the cuts.

The government is anxious that the current part-nationalisation of the sector – with some banks already wholly owned by the state – does not mean that Britain will end up having the worst of all worlds.

This scenario could become reality if the banking sector which has been bailed out and is propped up by vast amounts of public money is still determined to go its own way – putting its shareholders above the national interest – and refusing to obey the demands of its masters, the government.

The amount of public money being pumped into the overall economy – there is now widespread alarm about the vulnerable state of the manufacturing and engineering sector with major failures being imminent – is likely to be increased.

It’s possible that Darling is considering a big jump in VAT in the future – even though he’s just cut it by 2.5 per cent – with a wide body of opinion concluding that the £20bn giveaway budget last week will still not be enough to ‘kick-start’ the ailing economy.