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Retail customers watch rates

Since the start of the year, City analysts have been expecting a steady rise in interest rates. Now there is a general feeling the pressure is off and rates may have peaked.

The Bank of England monetary committee remains divided on the issue - certainly nobody thinks rates are about to start dropping. But a slowdown in the housing market, a feeling that US rates have also peaked and the continuing weakness of the euro are all contributing factors.

It is too early for the lenders to react but certainly the most aggresive players in the market, such as Alliance & Leicester, will be watching with added interest over the next few weeks. Car retailers need to be ready to respond if rates in the high street start to fall, even by a tiny amount.

Dealership business managers say customers are becoming more and more rate conscious. They recognise the convenience of arranging finance at the point of sale but will walk if there is any attempt make excessive profit. It is becoming more important than ever to pitch the first quote at a competitive price.

In this market, headlines are important. Tesco is saying 'we've cut our rates again' but that is only partly true. Loans of £15,000 and £5,000 are marginally cheaper but £10,000 and £2,000 loans are more expensive than six months ago.


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