Bank of England cuts interest rates to 1.5%

The Bank of England's Monetary Policy Committee (MPC) has cut interest rates by 0.5% to 1.5%, the lowest level in the Bank's 315-year history.

The reduction follows a 1% cut a month ago and a huge 1.5% cut in November. The decision has been met with mixed reviews however, with some commentators claiming borrowers won’t feel any benefit.

Peter Rollings, managing director of estate agent Marsh & Parsons, said: “Never look a gift-horse in the mouth, but the vast majority homeowners will never feel the benefit of this cut. Banks simply aren’t passing these cuts on. While it will have a positive impact on sentiment, vital at the moment, interest rates mean very little if you don’t have a large deposit – in London, house prices are still high enough that a 25% deposit is a fortune for a first-time buyer.

“The Bank Base Rate cut is a further step in the right direction, but if we’re to see even a mild improvement in the number of people able to afford to move home – the Government must start acting to thaw the mortgage freeze. Banks can’t lend because they have no money to lend – the Government promised us action in November. The action we’ve seen to date is simply not enough.”

David Elms, spokesman for Impartial, said: “Over recent months, plunging rates have brought welcome relief for homeowners with tracker mortgages. But his further cut will lead more lenders to impose the collar clause in customers’ contracts, meaning fewer borrowers will benefit from reduced repayments. Homeowners therefore need to check the small print to see whether they will definitely feel the full benefits of the drop.

“It’s a particularly difficult and confusing time for those looking to buy or remortgage. Deals are being repriced and terms and conditions revised almost daily, with some lenders relaxing criteria while others continue to toughen them. Borrowers should make sure they consult a whole of market mortgage adviser to have access to all the available deals for their needs and ensure they are getting the best mortgage deal possible.”