UK base rate hits another record low
March 2, 2009
Following the January Monetary Policy Committee meeting the base interest rate in the UK was cut to its lowest level in the history of the Bank of England, falling to just 1.5 percent.
However, following the latest MPC meeting in February the base rate has been cut yet again, dropping to just 1 percent, and sending it plunging to a fresh record low. It is now at its lowest in the history of the central bank, which spans over three hundred years.
The government has made it clear that it hopes to ease the effects of the global financial crisis and the recession through the reduction of the base interest rate, but some industry professionals said that reducing the interest rate alone will not really help. There are now also concerns that whilst the base rate cuts may help some borrowers it will adversely affect savers, who will earn hardly anything on their savings.
One industry official said that the rate cuts were now really harming savers, and this in turn was adversely affecting the level of funding that lenders had access to in order to finance mortgage lending. Another industry group said that it was unsure whether rate cuts would boost the economy and improve mortgage lending, adding that improved access to finance was the most important thing.
The Federation of Small Businesses stated that most if its members had voted to keep interest rates static, stating: “These figures suggest that the recent interest rate cuts are not having the desired effect and other means of economic stimulus are required.”
However, one economist said: “The Monetary Policy Committee is right to cut Bank Rate to 1%, even though some question the merit of doing so without greater effort to increase the availability of credit to hard-pressed businesses.”
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[...] lender also said that whilst the series of base interest rate cuts, which has resulted in the base rate falling to just 0.5 percent, have helped many homeowners enjoy greater affordability when it comes to making their mortgage [...]