Car insurance: Rate cut 'may not encourage Brits to buy vehicles'

Friday, 09 January 2009

People who already have motoring costs such as car insurance and fuel to pay for may not be persuaded to invest in new vehicles by this week's interest rate cut, it has been suggested.

According to the Retail Motor Industry Federation (RMIF), although the rate reduction will help out people looking to borrow money in order to update their current vehicle, savers will lose out.

Therefore, individuals who are reliant on the interest accumulated on money put away in bank accounts for their disposable income may be even less inclined to invest in big purchases, it claimed.

Sue Robinson, director of RMIF, commented: "The government's reliance on interest rate reductions to stimulate the economy should be part of a wider package of measures and we urge that more direct approaches are used."

This comes after the Bank of England announced it was cutting the interest rate from two per cent to 1.5 per cent.

Earlier this week, RMIF called on the government to work on restoring consumer confidence in a bid to encourage motor insurance customers back into showrooms.

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