The Monetary Policy Committee at the Bank of England voted at a special meeting to cut Bank Rate to an all-time low of 0.1%.

It also agreed to increase its holdings of UK government and corporate bonds by £200 billion.

The Committee said that the spread of Covid-19 and the measures being taken to contain the virus will result in an economic shock that could be sharp and large, but should be temporary.

It added that the role of the Bank of England is to help to meet the needs of UK businesses and households in dealing with the associated economic disruption.

Second emergency cut in March

Just over a week ago the Bank of England announced a package of measures to support UK businesses and households through this period – including cutting the Bank Rate to 0.25%. Now it has gone futher.

It explained that UK and global financial conditions have tightened and a further package of measures was warranted.

What does it mean for mortgage borrowers?

Those on a variable rate – including standard variable rates and discounted variable rates – could see their mortgage interest rate fall in the coming weeks, although this is not guaranteed and is at the lender’s discretion.

These are unprecedented times and it’s hard to predict how lenders will react.

Tracker rate borrowers should see their rate automatically track down by the full 0.50 percentage points within one month, unless their mortgage contract specifies a minimum rate – known as a collar.

Fixed rate borrowers on an existing deal will see no difference to their pay rate for the duration of their agreed term.

Those looking for a new mortgage deal could find that rates fall on all types of deals in the next few weeks, meaning it could be a good time to consider remortgaging.

Andrew Montlake, managing director of the mortgage broker, Coreco, said: “This dramatic rate cut by the Bank of England is ultimately a symbolic one but it shows the absolute carnage that Covid-19 is wreaking across the UK and global economy.

“For the Bank of England to cut rates right to the bone highlights the extraordinary times we are living in.

“With UK interest rates now at their lowest level in history, we expect a surge in enquiries about what this means from existing and prospective mortgage borrowers.”

The next regularly scheduled MPC meeting will end on 25 March, with the minutes published on 26 March.