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| Bank lowers interest rates to 5% | Bank lowers interest rates to 5% |
| (about 1 hour later) | |
| UK interest rates have been cut to 5% from 5.25% by the Bank of England in an attempt to spur the economy in the face of the global credit crunch. | UK interest rates have been cut to 5% from 5.25% by the Bank of England in an attempt to spur the economy in the face of the global credit crunch. |
| It is the central bank's third cut in interest rates since early December. | It is the central bank's third cut in interest rates since early December. |
| Analysts said that problems in the money markets and recent dire news on house prices drove the decision. | Analysts said that problems in the money markets and recent dire news on house prices drove the decision. |
| The Bank said that disruption in financial markets and tighter credit conditions could lead to a slowdown in the wider economy. | The Bank said that disruption in financial markets and tighter credit conditions could lead to a slowdown in the wider economy. |
| Decision welcomed | Decision welcomed |
| Business groups welcomed the decision and called for further cuts to shore up growth. | Business groups welcomed the decision and called for further cuts to shore up growth. |
| "It is vitally important to ensure that problems in the financial sector and in the housing market do not damage wealth-creating businesses," said David Kern, economic adviser to the British Chambers of Commerce. | "It is vitally important to ensure that problems in the financial sector and in the housing market do not damage wealth-creating businesses," said David Kern, economic adviser to the British Chambers of Commerce. |
| The re-emergence of tensions in UK money markets, combined with evidence of a sharper deceleration in the housing market, has spurred the MPC into action Stuart Porteous, RBS Mortgage market movesRate cuts and you | The re-emergence of tensions in UK money markets, combined with evidence of a sharper deceleration in the housing market, has spurred the MPC into action Stuart Porteous, RBS Mortgage market movesRate cuts and you |
| "Undue delay in acting threatens to reduce the effectiveness of interest rate cuts that the MPC itself has anticipated already." | "Undue delay in acting threatens to reduce the effectiveness of interest rate cuts that the MPC itself has anticipated already." |
| The cut had been widely forecast by economists. | The cut had been widely forecast by economists. |
| "So far the Bank's gradual approach to cutting rates has been the right one," said Martin Temple, chairman of the EEF manufacturers' group. | "So far the Bank's gradual approach to cutting rates has been the right one," said Martin Temple, chairman of the EEF manufacturers' group. |
| "But, given how quickly the situation is changing, there are now greater risks to business and consumer confidence." | "But, given how quickly the situation is changing, there are now greater risks to business and consumer confidence." |
| Mortgage rates | Mortgage rates |
| Halifax, Nationwide and Barclays' mortgage arm, Woolwich, said they would cut their standard variable mortgage rates by the full quarter of a percentage point. | Halifax, Nationwide and Barclays' mortgage arm, Woolwich, said they would cut their standard variable mortgage rates by the full quarter of a percentage point. |
| However, many mortgage lenders have had to withdraw their most competitive deals in recent weeks. | However, many mortgage lenders have had to withdraw their most competitive deals in recent weeks. |
| HAVE YOUR SAYIrresponsible lending is the cause of most of our current financial issuesClive, Woking, UKSend us your comments | HAVE YOUR SAYIrresponsible lending is the cause of most of our current financial issuesClive, Woking, UKSend us your comments |
| Funding lending from money markets has become more costly for banks as a result of the uncertainty in financial markets and a shortage of funds caused by the global credit crisis. | Funding lending from money markets has become more costly for banks as a result of the uncertainty in financial markets and a shortage of funds caused by the global credit crisis. |
| "This is good news for those borrowers with mortgages tracking the Bank base rate," said Michael Coogan, director general of the Council of Mortgage Lenders. | "This is good news for those borrowers with mortgages tracking the Bank base rate," said Michael Coogan, director general of the Council of Mortgage Lenders. |
| "But in these dysfunctional market conditions, the base rate is not in itself a good guide to the cost or availability of funds to lenders." | "But in these dysfunctional market conditions, the base rate is not in itself a good guide to the cost or availability of funds to lenders." |
| Before the rate decision, Alliance & Leicester said it was raising rates on its entire mortgage range for the second time this week. | Before the rate decision, Alliance & Leicester said it was raising rates on its entire mortgage range for the second time this week. |
| Nationwide said it was raising interest rates on some of its fixed-rate products by between 0.12% and 0.32% from Friday. | Nationwide said it was raising interest rates on some of its fixed-rate products by between 0.12% and 0.32% from Friday. |
| Fixed-rate mortgages are priced from longer-term money market rates, rather than the Bank of England's base rate. | Fixed-rate mortgages are priced from longer-term money market rates, rather than the Bank of England's base rate. |
| Inflation risk | Inflation risk |
| BBC economics editor Stephanie Flanders says that the quarter of a percentage point rate cut indicates that the state of the UK economy is broadly in line with the Bank's expectations. | BBC economics editor Stephanie Flanders says that the quarter of a percentage point rate cut indicates that the state of the UK economy is broadly in line with the Bank's expectations. |
| Credit conditions have tightened and the availability of credit appears to be worsening Bank of England Read the comments in full | Credit conditions have tightened and the availability of credit appears to be worsening Bank of England Read the comments in full |
| That translates as slowing annual economic growth of between 1.5% and 1.75% this year, but not a recession, although inflationary pressures would still remain a problem. | That translates as slowing annual economic growth of between 1.5% and 1.75% this year, but not a recession, although inflationary pressures would still remain a problem. |
| The Bank said inflation could remain above the government's target of 2%, but should fall back, even if the price of oil and other commodities remain at their current high levels. | The Bank said inflation could remain above the government's target of 2%, but should fall back, even if the price of oil and other commodities remain at their current high levels. |
| It did not mention the housing market in its statement, but analysts said recent downbeat news on property prices had influenced the nine-strong MPC. | It did not mention the housing market in its statement, but analysts said recent downbeat news on property prices had influenced the nine-strong MPC. |
| The Halifax, the UK's largest lender, said on Tuesday that house prices fell by 2.5% in March, the biggest monthly decline since September 1992. | The Halifax, the UK's largest lender, said on Tuesday that house prices fell by 2.5% in March, the biggest monthly decline since September 1992. |
| "The re-emergence of tensions in UK money markets, combined with evidence of a sharper deceleration in the housing market, has spurred the MPC into action," said Stuart Porteous, head of economics at RBS. | "The re-emergence of tensions in UK money markets, combined with evidence of a sharper deceleration in the housing market, has spurred the MPC into action," said Stuart Porteous, head of economics at RBS. |
| The BBC's economics editor Stephanie Flanders will be answering your questions on interest rates, along with a mortgage expert, on News 24 at 5.30pm today. | |
| Do you have a question about interest rates or your mortgage to put to them? You can submit your question or comment using the post form below: | |