| Base rate slashed to lowest since 1951 |
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| 04 December 2008 | |
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The Bank of England has slashed the base rate to 2%. The cut from 3% was widely expected, and leaves interest rates at their lowest level for more than 50 years. Since the Bank of England was founded in 1694, the Bank Rate has never fallen below 2%.
"In a widely predicted move, the Monetary Policy Committee has reduced UK base rates to 2% from 3%, a level last seen in 1951," said the chief economist of Charles Stanley, Edward Menashy. "It is now generally accepted that the UK economy is in the midst of the weakest quarter of the current contraction, and further interest rate reductions may be required in the course of 2009."
The move follows a wave of interest rate cuts across the globe. New Zealand was one of several countries in the Asia-Pacific region to cut rates, down 1.5 points to 5%, while Indonesia made its first interest rate cut for more than a year. Closer to home, Sweden made an emergency interest rate cut, slashing a record 1.75% from its base rate. Will banks and building societies adjust their mortgage rates in line with the cut? The Halifax said: "Following today's announcement by the Monetary Policy Committee, the Halifax standard variable rate (SVR) is currently under review. An announcement will be made in due course."
Lloyds TSB, which also lends under the Cheltenham & Gloucester brand, has already pledged to pass on in full any reduction to its standard variable rate mortgage borrowers.
But Adrian Coles, director-general of the Building Societies Association, said: "Not all mortgage borrowers will find today's fall mirrored by their lender. Building societies have to balance the interests of borrowers and savers."
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