Shock 1.5% cut in interest rate |
The Bank of England’s decision today, to cut the interest rate by 1.5%, has been surprising to many people even in the current climate. In the largest cut for 27 years, the Bank reduced the rate to 3% – its lowest rate since 1955.
The size of the cut was unexpected by most banks, and they are not yet sure what to do with their mortgage rates. The government however, are pushing mortgage lenders to pass the rate on to borrowers, with the chancellor, Alistair Darling, saying “I think it’s essential that the banks do pass on the benefit of lower interest rates to people.”.
Clearly attempting to address the rapidly developing signs of recession, it is hoped that the cut will help strengthen the property market. With Halifax recently announcing that house prices dropped by 2.2% last month, bringing the average price to £168,176, and that the house price to average earnings ratio has fallen below 5.0 for the first time since February 2004, increased affordability should also help stimulate the market.
