The Bank of England has fulfilled most analysts expectations by reducing its base rate again, setting it at its lowest ever value of 1.5 percent.
A new precedent has been set in the Bank of England's 314-year history, following the latest decision from its Monetary Policy Committee (MPC).
The MPC has set the Bank's base rate to 1.5 percent, the lowest it has ever been. The rate - which had previously been at two percent - has been cut sharply since October as the Bank attempts to improve economic conditions by encouraging lending from high street mortgage and loans firms.
If banks and other lenders pass on the cuts to their customers, then it is cheaper for consumers to get mortgage loans. Additionally, people who already have variable rate loans might pay less interest, meaning they will have more money in their pocket to spend in the economy.
Most analysts had predicted a further cut, with estimates varying from 0.5 to one percent. However, not everyone agreed that lowering the rate was the best step forward.
Speaking yesterday (January 7th), before the announcement, the director of the Association of Mortgage Intermediaries Robert Sinclair warned that any reduction "will not be fully passed on by lenders". He felt that the real issue was the lack of liquidity in the mortgage sector. "Banks continue to be constrained by increasing capital requirements rather than being universally encouraged to support the wider economy," he added.
Mr Sinclair suggested that the government should intervene more in the mortgage market in an effort to get it moving again.
