Extra cash for mortgage-holders from last week’s interest rate cut will do almost nothing for the UK’s flagging economy.
Instead of stimulating spending, millions of borrowers will become savers not spenders as panic over job security sets in.
That’s according to Aaron Turner, housing market analyst and founder of www.look4aproperty.com.
“People aren’t taking the money they will save on their mortgages and spending it,” says Turner.
Turner says the UK is finally waking up to the importance of saving but this comes at the wrong time in the economic cycle. “What the UK needs is spending right now,” he says.
“We have been speaking to borrowers all week and asking them for their take on rate movements. The overwhelming feeling is any cut will not lead to much needed spending to stimulate the flagging economy.”
Turner predicts despite the UK having the lowest interest rate for more than 50 years the struggling retailers will not feel any benefit – which means Christmas in the high street is heading for disaster.
And figures due out this week from the Royal Institution of Chartered Surveyors (RICS) and Council of Mortgage Lenders (CML) will show further doom and gloom in Britain’s plummeting economy.
“People are worried about their jobs and are putting any money they will save back into the banks. I think right now people won’t be spending a lot this Christmas.”
Turner adds interest rate cuts alone will not be enough to kick-start the economy, and that job security was the key to getting people to spend again.
“You only get people spending when they have got faith in their jobs. But you have only got to look at the high street and shops like Next and Marks & Spencer to see it’s a bloodbath out there.”
