Although the Bank of England’s decision to lower interest rates to 4.5 per cent will help flagging financial markets, more action is needed to stave off a recession, it has been claimed.
Simon Rubinsohn, chief economist for the Royal Institution of Chartered Surveyors (Rics), said that the response from the Bank to the economic crisis was “appropriate”, but predicted that bad times are still ahead.
“At least two quarters of negative growth are likely and unemployment could climb from 1.7 to more than two million,” he claimed.
He added that house prices are expected to fall further still, although homeowners will be aided by lower borrowing costs.
Meanwhile, the spotlight now falls onto lenders to see how quickly they will respond to the move and lower rates in order to help customers with their debt management, it has been argued.
It is hoped that the full cut will be passed on “swiftly” to borrowers, according to Ben Thompson, the mortgages director for Legal & General.
By Jamie Price