| Central banks cut interest rates |
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| 08 October 2008 | |
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The Bank of England has cut interest rates by 0.5% to 4.5%. The move is part of joint action by seven central banks - including the Bank of England - to cut their interest rates by 50 basis points. The Bank of England's interest rate setting committee was not due to make a move until tomorrow, although a cut had been widely expected. The US Federal Reserve has cut rates from 2% to 1.5% and the European Central Bank trimmed its rate from 4.25% to 3.75%. The central banks of Canada, China, Sweden and Switzerland all took similar action in the co-ordinated move.
Council of Mortgage Lenders (CML) director general Michael Coogan said: "Today's package of bank funding and capital measures is further strengthened by this rate cut. Not only are the tripartite authorities now pulling together decisively to address domestic confidence, but international central bankers are also collaborating much more effectively on their position. All this decisive action augurs well for an improving market situation looking ahead, even though no one is pretending the tough times are over yet." Peter Rollings, managing director of estate agent Marsh & Parsons, said: "Thank God the Bank of England has finally woken up - this is the decisive action we've all been clamouring for. Together with the liquidity measures announced this morning, there is some light at the end of the tunnel for borrowers.
"A half percentage point cut in the base rate should allow lenders to lower their pricing on a lot of their products - and for those on tracker rates, the pain relief should be almost immediate. They could be saving over £60 a month on a typical interest-only £150,000 mortgage, and just under £50 a month off a repayment mortgage.
"The key is that lenders recognise their responsibilities to pass this cut on to borrowers." But the cut of 0.5% was the least expected, warned Virgin Money. "Rates may have to be cut again," said Grant Bather of the firm. "Consumers are reining in their spending and we've seen customers are keen to cut their debts by transferring balances."
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