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Bank of England cuts rates to 1.5%
Thursday 8 January 2009
Writes Seamour Rathore
seamour.rathore@consumerchoices.co.uk
The Bank of England cut the base rate by 0.5% today, pushing interest rates down to an historic low of 1.5%.
The Bank of England cut the base rate by 0.5% to 1.5% today. Rates have now fallen from 5% in September 2008 to 1.5%.
In a statement following the announcement, the bank said: The availability of credit to both households and businesses has tightened further, pointing to the need for further measures to increase the flow of lending to the non-financial sector.
The cut is good news for those who have a tracker mortgage without a collar or floor - around 3.7million borrowers in the UK, according to figures from John Charcol.
But the bad news for savers continues. As recently as last summer, savers could get a fixed rate of 6-7% on savings. But returns have been plummeting, since the series of base rate cuts which started in October.
Adrian Coles, director general of the Building Societies Association, said: It is savers who will bear the brunt of today's decision. Already savers have seen their interest payments cut as a result of earlier base rate reductions. While societies will want to help their saver members where they can, it will be difficult for them to ignore completely today's announcement.
However others felt that more needs to be done to help the housing market.
Simon Rubinsohn, chief executive at the Royal Institute of Chartered Surveyors, said: "The decision is unlikely to provide any meaningful encouragement for banks to increase the availability of finance to either households or businesses. Indeed, the risk is that lenders are set to become even more restrictive over the coming months in the face of the worsening economic climate."
Chris Eagle, commercial manager at CreditChoices.co.uk said:"Despite this further cut, what UK consumers need is fairer priced deals for mortgages and remortgages from the banks."
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