Bank of England cuts interest rates to 0.5%

The Bank of England's Monetary Policy Committee (MPC) has slashed interest rates from 1% to 0.5%.

The reduction means rates have now fallen almost 5% in the last year, having stood at 5.25% in February 2008.

Miles Shipside, commercial director, of Rightmove, said: “The Bank Base Rate cut is obviously good news for both those homeowners on tracker mortgages and those looking to move. However, for the market to return to a state of normality we would repeat the need for sensible loan-to-value ratios and income multiples to be made available to buyers, at reasonable interest rates.”

Michael Coogan, director general of the Council of Mortgage Lenders, said: “This latest cut presents immense challenges for lenders whose margins are already squeezed as a result of previous reductions, leaving little scope to lower discretionary mortgage rates further.

“Savings are the lifeblood of mortgage lending, and unless lenders can offer competitive rates to savers their ability to offer new mortgages is restricted.

“National Savings and Investments this week reported record inflows of savings, sucking more money out of the mortgage market, so today’s cut represents a double whammy for prospective mortgage borrowers.”