The Bank of England is likely to cut interest rates to record lows when its Monetary Policy Committee meets today.
Asesh Sarkar, CEO of employee loan provider, SalaryFinance, said it was a double edged sword for Brits. On the one hand, those wishing to purchase a house, for example, will have access to very low mortgage rates, allowing them to pay off their loans faster.
However, on the other hand, low interest rates traditionally mean that the economy is in trouble. Sarkar says that the cuts to interest rates will also mean people will be less likely to put money aside for a rainy day.
Sardar said: “The cuts to interest rates mean that people will be less likely to save in the foreseeable future. With interest rates already at record lows, the concept of putting cash aside for a rainy day will become even less attractive than it is now.
“However, the real problem lies in the possibility of more and more people in the UK turning to credit or some form of debt in order to support their finances, with Britain already facing a personal debt crisis topping a record £180 billion this year.
“With this period of uncertainty set to continue for the foreseeable future, people should consider consolidating their existing debts now. Taking control of your financial position during this period will pay off in the longer term.”
Jordan Hiscott, chief trader at Ayondo Markets, added: “This time last year, many thought 2017 would herald the beginning of a rate rise cycle and a gradual return to normality, yet our decision to leave the EU has left us in a very different place. [Today], it’s widely predicted that Mark Carney will cut interest rates down to 0.25% in a bid to soothe the UK’s economic woes.
“While I understand Mr Carney’s motive, the move is unlikely to have much of an effect on market sentiment as this has already been priced in. If he really wanted to signal a clear and aggressive pre-emptive strike to stave off a drop in consumer confidence, growth forecasts and PMI’s, he’d cut rates down to 0.1%.”