Londoners £5 better off from rate cuts
LONDONERS are about £5 a week better off as a result of last year's series of interest rate cuts by the Bank of England, new research shows. Economic analysts Business Strategies also found that London has benefited from lower borrowing costs more than any other area of the country because of its high level of mortgage debt.
Lower interest rates are a double-edged sword to consumers. They mean cheaper mortgage costs for homebuyers with variable rate mortgages, but they also reduce interest earned on savings.
Business Strategies has calculated that the seven rate cuts, which lowered the base rate from 6% to 4%, reduced the return on Londoners' savings by 1.8% of disposable income. But mortgage payments have been reduced by 3.1% of disposable income. The net result is that Londoners earning the average annual income of £20,000 after tax have seen their income boosted by 1.3%, or £5 a week.
In contrast, consumers in Yorkshire and Scotland have been left no better or worse off, while disposable income in the North West and Northern Ireland has risen by just 0.2%. The increase across Britain, where the average net income is £15,800, is 0.6%, or £1.80 a week. But Londoners should enjoy the extra cash while it lasts. The City believes interest rates will have increased to 5% by the end of the year.
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