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| Version 1 | Version 2 |
|---|---|
| Bank expected to cut rates again | Bank expected to cut rates again |
| (39 minutes later) | |
| The Bank of England is expected to cut interest rates later to their lowest for more than half a century. | The Bank of England is expected to cut interest rates later to their lowest for more than half a century. |
| Economists and business leaders have called for a one percentage point cut to 2% - a level not seen since 1951 - to prevent the downturn deepening. | Economists and business leaders have called for a one percentage point cut to 2% - a level not seen since 1951 - to prevent the downturn deepening. |
| Deutsche Bank economist George Buckley said the Bank needed to do "something aggressive" because of the worsening economic situation. | Deutsche Bank economist George Buckley said the Bank needed to do "something aggressive" because of the worsening economic situation. |
| Last month, the Bank announced a dramatic cut in rates from 4.5% to 3%. | Last month, the Bank announced a dramatic cut in rates from 4.5% to 3%. |
| 'Deep' recession | |
| However, some commentators have argued for even bigger interest rate cuts - calling for the Bank Rate to be cut to below 2% - which would take it to its lowest level in the Bank of England's 314-year history. | |
| Willem Buiter, a former member of the Bank's policy-making committee, now at the London School of Economics, has said that rates will need to be by next year, because the recession will be "deep" and "prolonged". | |
| Since the Bank was founded in 1694, the Bank Rate has never fallen below 2%. | |
| The minutes of last month's meeting showed that Bank of England policymakers had discussed an even bigger cut in borrowing costs of two percentage points, before opting for the 1.5 percentage point reduction. | The minutes of last month's meeting showed that Bank of England policymakers had discussed an even bigger cut in borrowing costs of two percentage points, before opting for the 1.5 percentage point reduction. |
| However, a rapid deterioration in business conditions since then has raised fears Britain could be heading for a much deeper downturn than had been previously thought. | However, a rapid deterioration in business conditions since then has raised fears Britain could be heading for a much deeper downturn than had been previously thought. |
| Businesses have reported continued restrictions to bank loans, the mortgage lending has slowed, unemployment has risen, consumer confidence has fallen and shops have slashed prices to attract customers in the Christmas shopping season. | Businesses have reported continued restrictions to bank loans, the mortgage lending has slowed, unemployment has risen, consumer confidence has fallen and shops have slashed prices to attract customers in the Christmas shopping season. |
| 'More cuts' | 'More cuts' |
| On Wednesday, a key measure of confidence in Britain's services sector contracted in November at its fastest rate since at least 1996. | On Wednesday, a key measure of confidence in Britain's services sector contracted in November at its fastest rate since at least 1996. |
| FROM THE TODAY PROGRAMME More from Today programme | FROM THE TODAY PROGRAMME More from Today programme |
| The UK services purchasing managers' index (PMI) dropped by more than expected to a new record low of 40.1 in November, from 42.4 in October. Any figure below 50 indicates their outlook is worsening. | The UK services purchasing managers' index (PMI) dropped by more than expected to a new record low of 40.1 in November, from 42.4 in October. Any figure below 50 indicates their outlook is worsening. |
| A Reuters poll of economists has shown that the majority now expect the Bank of England to respond decisively, and 40 out of 62 economists said they expect rates to be cut to 2%. | A Reuters poll of economists has shown that the majority now expect the Bank of England to respond decisively, and 40 out of 62 economists said they expect rates to be cut to 2%. |
| "They need to do something aggressive again, because of where the data's been taking us," said George Buckley, chief UK economist at Deutsche Bank. | "They need to do something aggressive again, because of where the data's been taking us," said George Buckley, chief UK economist at Deutsche Bank. |
| The Bank has clearly signalled that with the economy slowing sharply, it is prepared to act decisively. | The Bank has clearly signalled that with the economy slowing sharply, it is prepared to act decisively. |
| "We will take whatever action we feel is necessary on interest rates to steer the economy back into calmer waters," Governor Mervyn King told a parliamentary committee last week. | "We will take whatever action we feel is necessary on interest rates to steer the economy back into calmer waters," Governor Mervyn King told a parliamentary committee last week. |
| "We may need to cut Bank Rate more than we would otherwise have done," he said. | "We may need to cut Bank Rate more than we would otherwise have done," he said. |
| Mortgage savings | Mortgage savings |
| The financial information service, Moneyfacts, estimates that homeowners with a standard £150,000 repayment mortgage could save between £19 and £75 a month - depending on the size of the rate cuts and whether lenders pass on the cuts in full. | The financial information service, Moneyfacts, estimates that homeowners with a standard £150,000 repayment mortgage could save between £19 and £75 a month - depending on the size of the rate cuts and whether lenders pass on the cuts in full. |
| Not all mortgage lenders are likely to pass on any cuts in full | Not all mortgage lenders are likely to pass on any cuts in full |
| According to mortgage advisers, John Charcol, only 10 out of 69 lenders have passed the last two rate cuts in full to their customers on standard variable rate mortgages. | According to mortgage advisers, John Charcol, only 10 out of 69 lenders have passed the last two rate cuts in full to their customers on standard variable rate mortgages. |
| However, Lloyds TSB, which also lends under the Cheltenham & Gloucester brand, has already pledged to pass on any reduction to its borrowers on standard variable mortgages in full. | However, Lloyds TSB, which also lends under the Cheltenham & Gloucester brand, has already pledged to pass on any reduction to its borrowers on standard variable mortgages in full. |
| For those mortgage customers on tracker deals - which track the Bank Rate - they may not get the full benefit of further cuts in rates. | For those mortgage customers on tracker deals - which track the Bank Rate - they may not get the full benefit of further cuts in rates. |
| Some lenders have a floor, also called a collar, on such deals for new and existing customers. This means that if the interest rates fall past this point, any cut will not be passed on to customers. | Some lenders have a floor, also called a collar, on such deals for new and existing customers. This means that if the interest rates fall past this point, any cut will not be passed on to customers. |
| Meanwhile on Wednesday, the government unveiled plans to allow people facing repossession to defer part of their mortgage interest payments for up to two years. | Meanwhile on Wednesday, the government unveiled plans to allow people facing repossession to defer part of their mortgage interest payments for up to two years. |
| However, any further cut in rates is unlikely to be welcomed by savers who often depend on interest payments from their savings - as banks are also likely to cut the interest they pay on these accounts. | However, any further cut in rates is unlikely to be welcomed by savers who often depend on interest payments from their savings - as banks are also likely to cut the interest they pay on these accounts. |
HOW MORTGAGE LENDERS RESPONDED TO RATE CUTS | HOW MORTGAGE LENDERS RESPONDED TO RATE CUTS |
| Lender SVR before BoE decision SVR after BoE decision Rate change (percentage points) HBOS 6.50% 5.00% -1.5 Nationwide BS 6.19% 4.69% -1.5 Abbey 6.94% 5.44% -1.5 Lloyds TSB/ C&G 6.50% 5.00% -1.5 Northern Rock 7.34% 5.84% -1.5 Barclays 6.64% Under review  RBS 6.69% 5.19% -1.5 HSBC 6.25% 5.44% (5 Dec) -0.81 Alliance & Leicester 6.94% 5.84% -1.1 Bradford & Bingley 7.09% 5.59% (7 Dec) -1.5 Bristol & West 6.59% 5.49% -1.1 Britannia BS 6.30% 5.30% -1 Yorkshire BS 6.60% 5.60% -1 GE Money 10.39% 8.44% -1.95 Coventry BS 6.84% 5.34% -1.5 Standard Life 6.59% Under review  Clydesdale & Yorkshire 6.64% 5.14% -1.5 Chelsea BS 6.94% 5.79% (31 Dec) -1.15 Skipton 6.45% 5.95% -0.5 SVR: Standard Variable Rate. All changes on 1 December unless stated.    | Lender SVR before BoE decision SVR after BoE decision Rate change (percentage points) HBOS 6.50% 5.00% -1.5 Nationwide BS 6.19% 4.69% -1.5 Abbey 6.94% 5.44% -1.5 Lloyds TSB/ C&G 6.50% 5.00% -1.5 Northern Rock 7.34% 5.84% -1.5 Barclays 6.64% Under review  RBS 6.69% 5.19% -1.5 HSBC 6.25% 5.44% (5 Dec) -0.81 Alliance & Leicester 6.94% 5.84% -1.1 Bradford & Bingley 7.09% 5.59% (7 Dec) -1.5 Bristol & West 6.59% 5.49% -1.1 Britannia BS 6.30% 5.30% -1 Yorkshire BS 6.60% 5.60% -1 GE Money 10.39% 8.44% -1.95 Coventry BS 6.84% 5.34% -1.5 Standard Life 6.59% Under review  Clydesdale & Yorkshire 6.64% 5.14% -1.5 Chelsea BS 6.94% 5.79% (31 Dec) -1.15 Skipton 6.45% 5.95% -0.5 SVR: Standard Variable Rate. All changes on 1 December unless stated.    |
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