The Bank of England has announced that interest rates are to be cut by one percent, leaving them at two percent.
A cut in interest rates of one percent has been announced by the Bank of England's Monetary Policy Committee (MPC), leaving its base rate at two percent.
The rate is now at its lowest point since 1951 and has never been lower in the Bank's 314-year history. A cut had been widely expected by analysts as the economy continues to struggle and a lack of mortgage availability stifles the property market.
As well as potential property buyers, homeowners who are at risk of falling behind on mortgage repayments should be helped by the cut. The government is expected to urge lenders to pass the cut on to consumers, as it did with the 1.5 percent reduction in November.
Lloyds TSB had already pledged that it will do so. Stephen Noakes, marketing director at Lloyds' main mortgage lending arm, said yesterday (December 3rd) that the cut would be "a welcome bonus" and will pass it on "whatever the size".
He added: "As soon as we know the impact of the base rate decision on wholesale funding costs, we will launch our new fixed and tracker rates. If we can make a saving on funding new mortgage products, we will look to pass this on."
Some commentators have said that the rate will need to go even lower. Willem Buiter, a former member of the MPC from the London School of Economics, told BBC Radio 4 that the rate would eventually be set to zero and said there was "very little point" in delaying the reduction.
