Add a comment

Print

Send to a friend

Bookmark with:

What's this?

Bank of England slashes rates to 3%

Bank of England slashes rates to 3%

Thursday 6 November 2008

Writes Seamour Rathore
seamour.rathore@consumerchoices.co.uk

The Bank of England made an unexpected 1.5% cut in the base rate today, pushing interest rates down to 3%, the lowest level since 1955.

The Bank of England cut the base rate by 1.5% to 3% today in a move to stimulate the economy. The bank noted the prospects for falling inflation influenced the decision. But by far the most significant factor was “a very marked deterioration in the outlook for economic activity at home and abroad.”

Sam Hill, fixed income fund manager at Threadneedle, said: “The Bank of England's ‘shock and awe’ approach is justified by conditions in the economy and financial markets. By trumping the market expectations so dramatically, the MPC has increased the probability that lenders will pass on a meaningful proportion of the cut to consumers and businesses.”

Commentators had expected a cut in the region of 0.5% - 1%, although there had been some calls for a much bigger cut in the base rate. The last time the Bank cut interest rates by as much as 1.5% was in 1981.

The Bank last cut interest rates a month ago on 8 October when they were lowered by 0.5% to 4.5%.

Simon Rubinsohn, chief economist at the Royal Institute of Chartered Surveyors (RICS), said: “This recognises the severity of the downturn and the squeeze on credit. This reduction in the rates should now enable lenders to pass on a significant amount of the benefit to the high street.

“Those at the margins on variable rate mortgages will breathe a sigh of relief as they find their mortgage repayments more affordable.”

Ray Boulger of mortgage broker John Charcol (www.charcol.co.uk) added a note of caution: “As with last month, I expect only a small minority of lenders to cut their SVR by the full amount.”

Chris Eagle, commercial manager at CreditChoices.co.uk said: “It's time for mortgage providers to reflect this significant cut in interest rates, by providing new mortgage products which reflect the lower base rate. They should also take a long, hard look at where they might fairly position their standard variable rates. The latter are particularly important for homeowners whose mortgage deal period has ended, but who are struggling to find a fairly-priced remortgage deal."

Ask Our Expert – Struggling with mortgage repayments>>>

Compare Mortgages>>>

Add a comment

Print

Send to a friend

Bookmark with:

What's this?