Base rate down to 1%

by Gill Montia

Story link: Base rate down to 1%

The Bank of England’s Monetary Policy Committee yesterday voted in favour of a 0.5% cut in the base rate, to 1%.

The Bank has been cutting the base rate aggressively since October when it stood at 5%, in efforts to ease the plight of individuals and businesses during the economic downturn.

Savers have suffered as a result; according to uSwitch, one-third of UK savings accounts offered rates of 0.5% or below even before today’s cut.

In the case of lenders, some have pledged to pass on base rate cuts in full while others argue that because they are reliant on money market rates to fund their businesses, they cannot follow the Bank’s lead.

Meanwhile, lenders such as building societies that depend on retail deposits to fund their mortgages are fearful that deposits will fall as consumers lose the will to save.

From the outset, businesses and homeowners have welcomed the Bank’s policy of reducing rates, however, four months down the line the credit essential to companies and the UK housing market remains in very short supply.