Print friendly version 7 Feb 2008

Base rate cut by 0.25%

In a move widely anticipated by the financial markets, the Monetary Policy Committee today voted to cut the Bank of England Base Rate by 0.25%.

The Base Rate is now at 5.25%, following the previous decision to cut rates by 0.25% in December 2007.

Nationwide Building Society was one of the first lenders to announce that it would pass on the full interest rate cut to its borrowers after today’s MPC meeting. The society’s standard variable rate will now be 6.74 per cent, reduced from 6.99 per cent. Any changes to its savings rates will be announced in due course.

Ray Boulger, senior technical manager at John Charcol, said: "Around 20% of lenders did not pass on the whole of December’s rate cut and I expect the proportion to be higher this time around. We find ourselves in this situation as lenders’ margins, the difference between the cost to them and what they charge the consumer, are at the highest they have been for a very long time."

For those shopping around for a new mortgage deal, Boulger advised: "Flexibility remains paramount in an uncertain market, so an Early Repayment Charge (ERC) free tracker, or one with a drop-lock option (where you can switch to a fixed rate) is a good choice in the current market, leaving borrowers the option to switch to a fixed rate at a later time when they may well offer even better value than today."

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