Money News

Bank rate slashed to 0.5%

Thursday, 5 March 2009

Writes Hazel Cottrell
hazel.cottrell@consumerchoices.co.uk

Great news for those on a tracker mortgage, but bad news for savers as the government slashes the base rate once again…

The Bank of England cut the base rate again today, from 1% to 0.5%. This takes the base rate to a new all-time low and is the sixth consecutive cut in the rate since October, when it stood at 5%.

The Bank also said that it will begin a programme to buy £75billion of assets, predominantly from banks. This widely-predicted move, also referred to as “quantitative easing”, is the Bank’s latest attempt to get the banks lending to businesses and so kick-start the economy.

As a result of the rate cut, those on tracker mortgages will see their monthly repayments continue to shrink, and borrowers on other variable rates may also benefit. Lloyds TSB (www.lloydstsb.com), Cheltenham and Gloucester and Skipton Building Society have all promised to pass on the rate cut in full to customers on their standard variable rate (SVR).

The Council of Mortgage Lenders (www.cml.org.uk) said yesterday that while some mortgage holders may benefit from the cut, “it would not be welcomed by savers, lenders or would-be borrowers.”

It said that savings are a crucial source of funding for mortgage lenders and expressed concern at the fact that “in a sustained low interest rate environment it becomes increasingly difficult for lenders to reward existing borrowers with low mortgage rates and offer competitive savings rates to attract deposits.”

Chris Eagle, commercial manager at CreditChoices.co.uk, said: “This cut is another blow to Britain’s savers. Many people are already suffering with depressingly low rates and we are likely now to see savings providers make further reductions in interest rates.

“However, it often takes these providers a few days to act, so now is the time to grab a good deal when you can. Find the best fixed-rate deal you can, and snap it up before this latest cut is reflected in savings rates”

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