The Bank of England has reduced interest rates again

The Bank of England has announced further interest rate cuts in its base lending rate with the rate now at a record low of 0.5% in an attempt to boost the slowing economy.

For those in business who have overdrafts or loans agreed at a margin above the base rate, this will certainly be welcome news.  Homeowners who hold tracker rate mortgages, which follow the movements of the Bank of England base rate, will also see the benefit of the interest rate cuts immediately, unless their lender has a "collared" minimum rate set.

However the rate cuts will mean very little unless lenders pass them on to all borrowers.  If this happens then this will put energy back into the market.

With the Bank of England making it clear that it is prepared to do all it can within its powers, lenders are going to find it very difficult to justify not passing on the rate cuts to all borrowers.

Business and consumer confidence has been deteriorating sharply in recent months, and recession has replaced inflation as the major threat to the economy.  These massive cuts should help to ease the conditions in the credit market and allow banks to pass on the benefits to their customers. 

The Bank of England has undoubtedly made the right decision. Slashing the base rate to 0.5% will act as the vital boost to consumer confidence that has been sorely needed for some time.  House prices are more affordable now than they have been for well over a year and the rate cuts combined with pent up demand should help kick start activity in the property market in the coming months. 

Going forward, it is crucial that the Government and Bank of England ensure they continue to safeguard economic stability and consumer confidence which will remain fragile in today’s volatile climate.