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Could low UK rates end up costing?

Thursday, March 06, 2014 - 02:24

March 6 - UK interest rates are among one of the lowest in the world and the Bank of England has again decided on a no change approach keeping them at historic lows of 0.5%. Hayley Platt looks at the impact of pro-longed low rates.

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It's been five years since the Bank of England dropped its rate to just half a percent. And they've stayed there ever since. It's been good for some and bad for others. Ewan Lloyd-Baker is CEO of electronics manufacturer Hayward Tyler. SOUNDBITE: Ewan Lloyd-Baker, Hayward Tyler Group, saying, (English): "It's enabled us to be a lot more positive about how we look at the future. We've invested £1 million pounds on capital equipment in processes and improving the business and I think we've got a lot more confidence than we have had for some time." The Bank of England also ploughed 375 billion pounds into the economy in 2009 after the financial crash and consumers were urged to spend . Savers like Ryan Duke - a design engineer at Hayward Tyler - feel they've been made to pay for the crisis SOUNDBITE: Ryan Duke, design engineer, Hayward Tyler, saying (English): "I'm disappointed that I'm not going to get a lot of return from something I've worked hard for and all my family have worked hard for that you put the money away and you don't actually get anything from it." But many believe the monetary policy has helped kept companies afloat and prevented unemployment rising too high. It's certainly helped Britain's mortgage payers - and in a country that likes to own property that's a lot of people. Five year's ago the interest on an average mortgage was more than 7 percent. Now it's half that - and homeowner Geoff Robinson says it's helped him a lot. SOUNDBITE: Geoff Robinson, mortgage payer, saying (English): "We save about £400 a month which is significant when you've got a growing family as we do. A lot of that goes on child care and just the everyday things but also it's given us money to spend on the new house." But house prices have now started rising again. And ING's Casten Brzeski fears that could be dangerous. SOUNDBITE: Carsten Brzeski, ING, saying (English): "The disadvantage of lower rates is clearly that it can lead to enterprise bubbles especially in the housing market but also in other segments of financial markets. If these asset bubbles should burst in the future we have a new crisis." Those trying to get onto the property ladder are also finding it hard. SOUNDBITE: Imara Caffoor, saver, saying (English): "It does put me off saving in a sense, but the fact that I need to do it to put a deposit down just means that it's not coming at a rate that I'd like it to. It's not increasing as much as it would." Neither is Britain's economic output. It's still languishing 1.4% below the pre-crisis peak. There's no end in sight yet to what began as a short-term experiment.

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Could low UK rates end up costing?

Thursday, March 06, 2014 - 02:24