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Supporters of cheaper loans must wait

We sit in a precarious position with our economy in the UK at the moment and the prospect of cheaper loans was one hope that was going to help fuel the continued economic growth we have enjoyed over the past few years.

With the single tool of interest rate adjustments, our central bank is trying to manage growth, inflation, credit liquidity and economic stability. It's a tough call and when interest rates were reduced last month many expected cheaper loans to become more widely available. But surprisingly the rate cut was not passed on by most banks and building societies, with some lenders even increasing their rates in an attempt to offset the profit-damaging effect of the global credit difficulties.

If the February rate reduction was aimed at putting extra money into our household budgets, then most people would agree that they felt hardly any effect. Anyone lucky enough to benefit from a repayment drop on their loans or mortgage would have seen those savings quickly eaten up by higher household energy and food bills.

We've yet to see the real effect of the credit crunch on longer term indicators and the fact that most loans companies are putting the squeeze on prospective customers and only agreeing to deal with those who represent a low risk, is a sure sign that cheaper loans are unlikely to materialise unless we see further significant base rate cuts in the future.

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