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Further rate cut needed

Published: 27/03/2008

The Bank of England should consider a further rate cut despite rising inflation, a leading broker has claimed.

Independent mortgage advisor, John Charcoal, has called for the reduction and noted that lenders are still struggling to keep up having lost some of their own savings.

"A further Bank Rate cut would not normally be expected," said technical manger, Katie Tucker.

"However, cash-strapped homeowners will be relieved to know that some relief to their purse-strings may still be due, as mortgage lenders’ own cost of borrowing is high, and a further Bank Rate cut may be used to relieve this."

A cut from the banks' monetary policy committee (MPC) could reduce the monthly mortgage payments for borrowers on variable and tracker rate mortgages.

Ms Tucker explained that banks are paying more for their money and the rate is now "so high that they would need to charge in the region of three quarters of a per cent above bank rate".

When inflation reaches three per cent, the MPC has to write a letter of explanation to the chancellor, Alistair Darling.

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