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Interest Rate cut by the Bank of England - 06/11/2008

The latest interest rate cut by the Bank of England’s Monetary Policy Committee has slashed the figure to a level last seen more than 50 years ago.

The committee announced on Thursday, 6 November that the base rate would be cut by 1.5 per cent to just 3 per cent. The rate is the lowest since 1955.

The move, which took many financial experts and the stock market by surprise, is designed to help hard-pressed homeowners and businesses.

Chancellor of the Exchequer, Alistair Darling hauled bank chiefs into a meeting on the morning of 7 November, to urge them to pass on the interest rate cut.

The heads of all major high street lenders were summoned to a breakfast meeting at the Treasury at which they were told to drop mortgage rates “as quickly as possible”.

Lloyds TSB and Abbey have announced that they will pass on the full 1.5 per cent cut to their mortgage customers, although some lenders withdrew tracker mortgages – which follow the Bank of England base rate – for repricing before the rate was cut.

The rate cut has been widely welcomed, with Federation of Small Businesses national chairman John Wright commenting: "This unexpectedly large rate cut will make an enormous difference to small firms and will put money in people's pockets before Christmas."

British Retail Consortium director-general Stephen Robertson said: "This is the kind of shock tactic that could get the economy's heart beating again.”

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