Legal & General: Bank of England must walk a 'tightrope' on base rate

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Legal & General: Bank of England must walk a 'tightrope' on base rate

Thu 4th Sep 2008

The Bank of England's monetary policy committee (MPC) has to walk a "tightrope" between inflation and giving borrowers leeway, Legal & General has said.

Commenting after the MPC's decision to hold the rate at five per cent, a spokesperson for Legal & General said it was good that short-term fixed rates are starting to come down in line with swap rates.

But the spokesperson added that it was "no surprise" that the base rate was held.

The situation for borrowers is not as bad as it is sometimes reported, the spokesperson explains.

While first-time buyers are struggling, Legal & General predicted that the market will recover quickly when lenders once again become more active in high loan to value lending.

The Mortgage Works was also not surprised at the decision to maintain the rate.

A spokesperson said that the bank's "enthusiasm" for a cut to revive the economy was tempered by the rise of inflation.

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