The Bank of England decided to cut interest rates by 0.5 percentage points today.
The decision brings interest rates to their lowest level for 300 years.
The Bank’s Monetary Policy Committee has been aggressively cutting the Bank Rate in recent months, from 5 per cent at the beginning of October to its current level of just 1 per cent.
Some analysts have suggested that today’s cut will prove to be “pointless” and will fail to help lift Britain out of recession.
It is also unwelcome news for millions of savers who are bracing themselves for zero per cent interest on their accounts.
And many home owners are unlikely to benefit as almost seven million out of the 11.8 million mortgage borrowers have fixed their rate. Banks have also been reluctant to pass on the recent cuts to borrowers on their Standard Variable Rate. >>> By Myra Butterworth, Personal Finance Correspondent | Thursday, February 5, 2009
THE TELEGRAPH: Interest Rates: Bank of England Accused of 'Assault' on Savers
The Bank of England was accused of launching an "assault" on savers as it slashed interest rates to a new record low.
Consumer groups and trade bodies expressed anger at the latest 0.5 per cent reduction, arguing that it penalised savers, while doing little to help the majority of borrowers.
They also voiced concerns that with the returns on deposit accounts already at a record low, people would be put off saving, further reducing the supply of funds available to banks and building societies for mortgage lending.
Adrian Coles, director-general of the Building Societies Association, said: "The rate cut is an assault on savers who will have seen their interest payments drop by 83 per cent since July 2007.
"Savers dependent on interest income have not seen prices fall by a similar amount - their lifestyles have taken a significant blow."
He added that savers with building societies outnumbered borrowers by nearly eight to one.
The sector has 23 million savers, although there will be some duplication in the figure from people who hold accounts with more than one society, compared with only 2.9m mortgage customers.
Pensioners, who rely on returns from their savings to supplement their income, have been particularly hard hit by the recent interest-rate slide. >>> | Thursday, February 5, 2009
THE TELEGRAPH: A Rate Cut Business Did Not Want
Telegraph View: The Bank of England has dealt another blow to the prudent with a 0.5 per cent interest rate cut.
The Bank of England's 50 base points cut in the Bank Rate to one per cent takes the cost of borrowing to the lowest level in the Bank's 315-year history. Unusually, the cut has been made in the teeth of appeals from business leaders not to make money cheaper. The Federation of Small Businesses said it wanted rates kept on hold because the cost of credit is not a problem; its availability is.
The Federation was not alone in arguing for the status quo. In a report on Wednesday the National Institute of Economic and Social Research (NIESR) argued there was no point in cutting rates further, advising that the Bank would be better advised to buy corporate bonds.
The two interventions should have given the Bank's Monetary Policy Committee (MPC) pause for thought. Once again, the MPC appears to be behind the game. Having kept interest rates too low while the credit bubble was building, it then kept them too high as the economy slid into recession. Now it has embarked on what can only be described as panic measures, with the Bank Rate slashed from 4.5 per cent to one per cent in the space of just three months.
At every stage, the Bank has appeared off the pace. What is hammering business is not the cost of credit but the difficulty in getting hold of it. Today's cut will not help make it any easier. >>> | Thursday, February 5, 2009
If all savers took their money out of their accounts and stuffed their mattresses full with the cash, the banks would find themselves in a sorry state. Then they'd have no money to lend! And that's exactly what savers should do in protest: Demand their money at the bank counters! – ©MarkThe Dawning of a New Dark Age (Paperback & Hardback) – Free delivery >>>
