AKC News // Bank of England cuts UK rates to 1.5%

The Bank of England today cut interest rates by 0.5 points to 1.5% - the lowest level ever - as Britain grapples with a deepening economic slowdown.

Financial markets had been almost evenly split in pricing in a cut of either half or three quarters of a percentage point and analysts say another reduction next month looks a sure bet and that interest rates could fall below 1%.

UK rates never fell below 2%, even during the Great Depression of the 1930s, and they are now at their lowest level since the central bank was founded more than 300 years ago.

The severity of the current downturn has caught policymakers on the hop. They have cut UK interest rates by a total of 3.5 percentage points since October.

British bank HSBC said today it would pass on the Bank of England's latest 0.5 percentage point interest rate cut in full to its mortgage and business customers.

In a statement, HSBC said the move would reduce its variable mortgage rate to 3.94%, while small businesses holding floating rate loans - accounting for 97% of its SME customers - would also benefit from the cut in full.

Lloyds TSB unit Cheltenham & Gloucester also said that it would cut its variable rate by the full amount of any reduction by the BoE.

However, Nationwide, the UK's second-biggest mortgage lender, said last week that it would not pass on any further rate cuts to customers holding tracker loans.

The British government has repeatedly urged the country's lenders to help stimulate the economy by passing on in full any central bank rate cuts.

Source: RTÉ Business

Date : 08-01-2009