Lower Interest Rates Stimulating Demand.

There are issues with the Bank of England lowering interest and hoping it will stimulate demand.

• Will the full reduction be passed on by the Banks?
  It looks like the Banks will pass on the rate reduction but after a delay so that they make money. I am sure they would prefer to keep some of the reduction to claw back some of their losses and also because of the increasing risk of defaulters
  
  
• Nearly 50% of mortgage holders have fixed rate deals so there will be considerable delay before their monthly budget is effected.
  
  
• Will people spend money or keep their repayments constant and just pay back the mortgage quicker. My preferred option would be to keep up repayments as far as possible having allocated mortgage savings to covering increases in essentials such as food, petrol and energy.
  
  
• Small business would be unwise to invest in the current climate, unless they could see demand for their products or services improve.
  
  
• It may help small business reduce the cost of their borrowing, but that does not really solve anything if your order books is empty.
  
  
• Low interest rates encourage people and businesses to make bad investments that are not sustainable when interest rates eventually rise.
  
  
• The exchange rate will suffer, which will increase inflation, after all we import more than we export.