THE interest rate cut will benefit some homeowners but savers and those approaching retirement could be hit, an economist has said.
The Bank of England announced yesterday that rates were being cut for the first time in seven years, from 0.5% to an all-time low of 0.25%.
Dr Esmond Birnie, chief economist with PwC in Northern Ireland, said people with variable rate mortgages can expect a reduction in their monthly bill, albeit a modest one.
"For Northern Ireland let's say the round figure will be £10 a month. It's helpful, but it's not enormous," he said
On the flip side, the cut in rates will not help savers and Dr Birnie did not rule out the possibility of banks actually charging customers for depositing money in future.
One of the most "interesting and complex changes" will affect pension holders.
"It all comes down to if your pension is based on buying an annuity which is based on a rate of return at a certain point in time," Dr Birnie said.
"It will affect people who are just about to retire, let's say in a few months time. There is a possibility that the value of annuities will go down."
First-time buyers may also be affected as house prices increase due to quantitive easing, while a weaker pound hits holidaymakers.
The pound slumped by one per cent yesterday after the announcement.
"Obviously since June 23 (the EU referendum) there has been a fairly substantial fall in the value of the pound by about 10 per cent compared the euro and the dollar. That obviously is significant for people taking continental holidays," Dr Birnie said.
"I don't think today's decision will have a large effect on that. Probably what will happen through the course of the rest of the year is the sterling will claw back some of that loss, but it will be slow and may not come soon enough for the holiday season.
"The direct economic impact may be quite small. I think this measure in terms of interest rates will have to supplemented in terms of the government spending more on infrastructure."
Ulster Unionist MLA Philip Smith last night warned about a downgrading of growth forecasts by the Bank of England.
“On recent trends this would mean that, with Northern Ireland not matching recent growth in the rest of the UK, you would suspect our growth could disappear altogether," he said.
“The Executive must clarify what their forecast is in the context of this statement from the Bank of England. Do they concur that we have a potential to flat-line? And if yes, what measures do they intend to introduce to stimulate the local economy?”
