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Loan charges: BoE minutes reveal interest rate cut 'unlikely'

Loan charges are unlikely to fall in the near future as the Bank of England (BoE) voted unanimously to hold the lending rate unchanged at 0.5 per cent.

Minutes from the bank's most recent Monetary Policy Committee (MPC) meeting reveal all nine members elected to hold interest rates at their historic low.

The document reveals the MPC discussed the likely effectiveness of reducing the Bank Rate to below 0.5 per cent, with staff consulting over a possible reduction with building societies and the Financial Services Authority.

"While it would be beneficial for some existing borrowers, there were concerns that a cut in Bank Rate might prove counterproductive," the BoE said, adding that a cut was "likely to cause a reduction in the profitability of some lenders, especially building societies".

A cut in interests would weaken balance sheets and could lead to banks and building societies increasing other loan rates or restricting lending, according to the BoE.

In light of this, the MPC said it was "unlikely" to reduce interest rates in the foreseeable future.

John Fieldman

Having worked in the city for 19 years, John's main focus is interest rates and corporate finance.ADNFCR-2776-ID-801492161-ADNFCR

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