Record low is welcomed by the industry
Interest rates have been cut by one percentage point to 2% - equal to the lowest rate since the Bank of England was founded in 1694.
The move, which had been widely anticipated due to fears over the length and depth of the recession, has been welcomed by the industry.
Neil Chegwidden, head of residential research at Jones Lang LaSalle, said: “Quite bizarrely, given the 1.5% base rate cut last month and the various giveaways in last week’s Pre-Budget Report, today’s base rate cut will still be seen as a much needed boost and comfort to Britain’s beleaguered households and homeowners.“
“The rate cut will also be welcomed by the housing industry and will provide yet greater incentive for first-time buyers to step onto the property ladder. The Bank of England’s latest move will not solve all our housing woes but it does sow the seed of hope, especially looking towards next year. The magnitude of the cut is an additional boost for the housing market.”
A statement from the Council of Mortgage Lenders said: “We welcome today's rate cut by the Bank of England. This will help the wider economy, even if it cannot be reflected universally in lower mortgage rates. Where lenders feel they can reduce mortgage rates, they will. But their own cost of funds varies.”
Simon Rubinsohn, chief economist at the Royal Institute of Chartered Surveyors, said more cuts may need to follow. “Households and businesses will take some comfort from today's bold move by the Bank of Engladnd, which is a much-needed response to the dramatically worsening conditions across the whole economy. However, in our opinion it will not on its own be sufficient to bolster confidence given the scale of the current financial crisis. Consumer spending will remain subdued throughout 2009 and house prices will continue to fall despite the sharp drop in the cost of money, leaving first time buyers very much on the sidelines."
The cut followed a surprise move to slash the rate by 1.5 percentage points from 4.5% to 3% last month.
Housebuilder share prices had risen by between 2% and 19% this morning in anticipation of a cut.
See Citywatch for more full breakdown of share prices.