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Base rate cut to 5% by Bank of England

Thursday 10th April 2008

Financial pressures have seen the base rate lowered to five per cent by the Bank of Englands monetary policy committee (MPC).

In its April decision, announced at noon today, the MPC opted to cut the rate by 25 basis points, or a quarter of one per cent.

The news may come as some relief to borrowers who have faced higher interest rates over recent months.

Prior to todays announcement, the last time the rate was as low as five per cent was in December 2006.

Since that time, homeowners emerging from fixed-rate mortgage deals have faced interest rates of up to 5.75 per cent.

That level - the peak the base rate reached before beginning to drop again - was put in place in July 2007 and maintained for five months before falling in December.

However, borrowers may not yet be in a more secure monetary situation, in light of comments from Legal & General.

The financial services provider suggests that the impact of the rate cut on borrowers is likely to be "minimal".

"Whilst lenders actively make it more difficult and more expensive to take out a mortgage, the ripple effect on fixed rates resulting from a change in the base rate is limited," the organisation notes.

But building society Nationwide has announced it is to pass on the reduction to its mortgage customers as of May 1st.

The lenders new base mortgage rate is to stand at 6.49 per cent - which Nationwide claims is about 0.5 per cent lower than many of its counterparts.©

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