Lowest Bank Rate In Half A Century
The Bank of England has slashed interest rates by 1.5% in its most dramatic attempt yet to rescue the economy as it teeters on the brink of recession.
The unexpectedly large cut brings the official base rate to 3% - its lowest level in 53 years.
It has been hailed by CBI director general Richard Lambert as a "bold and welcome" move.
"This could help to ease conditions in the credit markets, and allow banks to pass the benefits on to their customers," he said.
The cut is the biggest in the UK since a 2% reduction in March 1981. It brings rates to their lowest level since 1955.
The Bank of England (BoE) said it made the move because of the "substantial risk" of undershooting its 2% inflation target as a sharp recession looms.
Lloyds TSB has said its mortgage arm Cheltenham & Gloucester will pass on the cut in full, reducing its standard variable rate (SVR) from 6.5% to 5%.
Other major lenders - including HSBC, Barclays & Nationwide - have said they are considering whether to follow suit.
The BoE's Monetary Policy Committee (MPC) unveiled its decision after new figures showed house prices have fallen by 15% in the past year.
Business leaders had called for a reduction of at least 1% to ward off a long and painful recession.
The Government - which has bailed out banks to the tune of £37bn - has demanded the cut is passed on in full to customers, especially small firms and homeowners.
Where this happens, borrowers on SVRs will see their monthly payments on a £150,000 mortgage fall by around £138.
But many lenders had earlier warned their customers were unlikely to enjoy the full benefit of any rate cut.
They said their hands were tied because interbank lending rates - known as Libor - remain stubbornly high.
Article Courtesy of Sky News
