LENDING Works has urged the Bank of England to raise interest rates next month.
The peer-to-peer consumer lender said that “it is high time for some rebalancing” to help savers “who continue to see their money fall in real terms”.
The central bank’s monetary policy committee (MPC) is meeting on 2 August to vote on whether to change the base rate, which currently stands at 0.5 per cent. Low interest rates are good for borrowers but bad for savers.
“The long-term health of the UK economy is close to our heart, and it is our belief that subsisting on near-zero interest rates is a long-term plan which is bound to come unstuck at some point,” Lending Works said in a blog post on its website.
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“Even in a mixed economic climate still bearing the scars of the financial crisis, there are surely more reasons to dip a toe in the water than not.
“And in such imperfect times, it should be a strong enough case for the Bank to act.
“If they let this opportunity slip by, it will deliver yet another hammer blow to disgruntled savers – and quite possibly the MPC’s credibility too.”
Lending Works said that P2P firms do not have any “skin in the game” as the rates they set for borrowers and lenders are not directly affected by base rate movements. It said that borrowing costs for its customers would “remain competitive regardless”.
Lower-than-expected inflation in June, sluggish wage growth and subdued economic activity have dampened the case for monetary tightening, although the markets have still factored in an August rate hike due to a longer-term need to move away from historically low interest rates.
Lending Works pointed out that even if rates rose by 25 basis points a base rate of 0.75 per cent is still near record lows for the UK.
“November’s rate hike is proof that borrowers, on balance, should be able to cope too, with there being an absence of reports that this decision had material, widespread negative ramifications on household debt,” it added.
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