The Bank of England has cut the base rate from 0.75% to 0.25% in an emergency response to the “economic shock” of the coronavirus outbreak. This is the lowest they have been for hundreds of years.
The base rate is the Bank of England’s official borrowing rate. (what it charges other banks and lenders when they borrow money)
The surprise rate-cut decision was taken at a special meeting of the Bank’s Monetary Policy Committee on Tuesday. The Bank said the cut was a response to the “economic shock” of coronavirus and would “help to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost, and to improve the availability, of finance”.
The base rate was last cut in 2016, when it fell from 0.5% to 0.25%. It’s risen twice since to reach 0.75%. But interest rates have generally been at historic lows since the 2008 financial crash.
Here are the need-to-knows for your finances:
- Some mortgages will get cheaper. Homes with tracker mortgages – whose rates ‘track’ the base rate – should see their rates drop. However, fixes won’t change and with others it’s not clear-cut.
- It’s more bad news for savers. Savings rates have been woeful for years and are now likely to fall further, although if you’ve a fixed-rate account you’re protected for the time being.