What does the recent interest rate cut mean for investors?

August 18, 2016

 Leading firm of financial advisers Newby Castleman (Financial Services) Limited is advising individuals on how the recent interest rate cut might impact them.
 
Following the unanimous decision of the Monetary Policy Committee to cut interest rates to 0.25%, Newby Castleman (Financial Services) Ltd is on hand to provide support and guidance in light of this new information.
 
As well as the publicised interest rate cut, The Bank of England has also announced further measures to stimulate the economy including an extension of its quantitative easing programme by £60bn to £435bn and the purchasing of up to £10bn of corporate bonds.
 
Designed to ensure the reduction in base rate feeds through to the rates faced by households and businesses, the Term Funding Scheme will provide funding for banks to support additional lending.
 
John Freeman, Financial Adviser at Newby Castleman (Financial Services) Limited, said: “The news that interest rates have been slashed to 0.25% is good news for borrowers but further bad news for cash savers that have been sitting tight in anticipation of a rate rise.
 
The decision has been made with the aim to boost the economy by encouraging savers to spend more. With the Term Funding Scheme likely to mean that banks aren’t reliant on cash deposits this may mean that savings rates are slashed further.
 
Mark Carney, Governor of the Bank of England, has clearly indicated that these types of measures can only do so much. Many savers were already resigned to low interest rates meaning they’re unlikely now to spend more and following the fiscal uncertainty that has followed the EU Referendum, businesses are unlikely to commit to further investing irrespective of how cheap borrowing becomes.
 
The snapshot of all this is that there’s likely to be additional fiscal stimulus applied in the Autumn statement which will put further pressure on Philip Hammond in what will be one of his first acts as Chancellor.
 
In simple terms, savers are now faced with a £25 return on a £10,000 savings pot, so this is further justification for individuals and companies with large cash reserves to look at reviewing their financial planning, and long term investment strategy, in light of this news.
 
Anyone who wishes to review their current position, or requires advice on an appropriate investment solution, can contact John Freeman, Financial Advisor at Newby Castleman (Financial Services) Limited on 0116 254 9262 or email jdf@newbyc.co.uk

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