Interest rates cut to 5% April 10th, 2008

The Bank of England (BoE) has today cut interest rates by o.25% to 5%, the third 25 basis point cut since December 2007. The move comes as the Bank looks to mitigate the impact of the credit crunch and the slowndown in the property sector.

Many of the big lenders have already stated that they will pass on the rate cut in full by reducing their standard variable rates (SVR). Whilst this is great news for those with mortgages linked to the SVR or the Bank of England base rate, it does not paint the full picture.

Lenders are not reducing fixed rate deals in line with the cut as the rates on offer in the money markets remain above the base rate. This means that Banks cannot afford to pass on the reductions.

However, on the whole most individuals with borrowings will welcome the cut in interest rates as will businesses. No sooner is this rate cut announced and the markets are already calling for the Bank to do more and cut rates by a further 0.25% in May. The chances are that they will have to wait longer than a month for the next reduction to borrowing costs.