Despite calls from various organisations including the Council of Mortgage Lenders and the British Bankers Association for an end to rate cuts, the MPC has acted anyway.
The CML claims that retail savings are now a vital source of funding for new lending, and this rate cut will therefore make it difficult to attract savings.
However it will be good news for some homeowners with about half of mortgage holders being on tracker and variable rates. Someone with a typical mortgage of £120,000 who has the full half point rate cut passed on by his or her lender will be better off to the tune of about £35 per month.
The scope for further interest rate cuts is obviously now fairly limited and it is likely that the next step for the MPC will be quantitative easing which will involve buying up assets in order to inject money into the economy.
