This article is from the source 'bbc' and was first published or seen on . It will not be checked again for changes.

You can find the current article at its original source at http://news.bbc.co.uk/go/rss/-/1/hi/business/7764741.stm

The article has changed 18 times. There is an RSS feed of changes available.

Version 7 Version 8
Bank cuts UK rates to 57-year low Bank cuts UK rates to 57-year low
(30 minutes later)
The Bank of England has cut interest rates by one percentage point, from 3% to 2% - the lowest level since 1951.The Bank of England has cut interest rates by one percentage point, from 3% to 2% - the lowest level since 1951.
The move, which followed a dramatic cut in November, has been welcomed by many commentators who said the cut would help the slowing economy.The move, which followed a dramatic cut in November, has been welcomed by many commentators who said the cut would help the slowing economy.
Hetal Mehta, of the Ernst & Young Item Club, said the cut was the "right medicine at the right time".Hetal Mehta, of the Ernst & Young Item Club, said the cut was the "right medicine at the right time".
The CBI said it was "critical" that banks now passed on the reduction to businesses and other customers. A number of lenders have said they will pass on the cut in full to customers with standard variable rate mortgages.
While banks are expected to cut the interest they pay on their savings accounts, no decisions have yet been made. However, banks and building societies have said their savings rate are "under review".
The Royal Bank of Scotland said it would be passing on the cut in full to its small business customers. HSBC and Lloyds TSB, which also owns Cheltenham and Gloucester, have said their standard variable rate mortgages would be cut by the full one percentage point cut.
Lloyds TSB/Cheltenham & Gloucester said they would be passing on the rate cut to small business and mortgage customers, while HSBC and Skipton said they would be cutting their standard variable mortgage rates. Before the interest rates decision, the Halifax said its customers with existing tracker mortgages, that follow moves in the Bank of England's Base Rate, would benefit in full from any cuts. You could almost hear the sigh of relief up and down the country. Hetal Mehta, Ernst & Young Item club class="" href="/1/hi/business/7764736.stm">What the cut means for you class="" href="/1/hi/business/7764690.stm">Which lenders have passed on cut?
While Skipton building society said they would pass on a cut of at least 0.95 percentage point.
Royal Bank of Scotland and Lloyds TSB/Cheltenham & Gloucester will also pass on the rate cut to their small business customers, they said. Before the interest rates decision, Halifax said its customers with existing tracker mortgages, that follow moves in the Bank of England's Base Rate, would benefit in full from any cuts.
This was despite a clause in the Halifax's paperwork which would have allowed it to put a limit on the cuts it passed on to mortgage customers.This was despite a clause in the Halifax's paperwork which would have allowed it to put a limit on the cuts it passed on to mortgage customers.
You could almost hear the sigh of relief up and down the country. Hetal Mehta, Ernst & Young Item club What the cut means for youWhich lenders have passed on cut
Commenting on the reaction to the Bank's latest interest rates cut, BBC economics editor Hugh Pym said: "There wasn't quite the shock value of the dramatic one-and-a-half point reduction in November. "But we shouldn't forget the scale of the Bank of England's action. The cost of borrowing has been more than halved since early October, as the Bank got to grips with the rapid decline in confidence and spending."
Economic turmoilEconomic turmoil
Earlier, there was further evidence of the rapidly slowing economy.
House prices fell 2.6% in November - their sharpest monthly drop since the housing market crash of the 1990s, according to the Halifax.
According to its latest survey, that increased the annual rate of house price falls to 14.9%.
Rate of interest slashed againRate of interest slashed again
Halifax, which is the UK's biggest mortgage lender, said the average property in the UK was now valued at £163,605, nearly £31,500 lower than 12 months ago. Commenting on the reaction to the Bank's latest interest rates cut, BBC economics editor Hugh Pym said: "There wasn't quite the shock value of the dramatic one-and-a-half point reduction in November.
New car sales in November fell 36.8% on the year before - the steepest decline in nearly three decades according to the Society of Motor Manufacturers and Traders (SMMT). "But we shouldn't forget the scale of the Bank of England's action. The cost of borrowing has been more than halved since early October, as the Bank got to grips with the rapid decline in confidence and spending."
The SMMT said the decline was most pronounced in the market for private cars, with registrations down 45.1% in November. Earlier, there was further evidence of the rapidly slowing economy in the UK:
Elsewhere, the homewares retail chain The Pier - which has 31 stores and 17 concessions across the UK - became the latest victim of the economic turmoil and was placed in administration. It employs about 400 workers.Borrowing costs have also come down in the 15-nation eurozone. The European Central Bank has cut its key interest rate to 2.5% from 3.25%, the biggest reduction in its history. • House prices fell 2.6% between October and November - their sharpest monthly drop since the housing market crash of the 1990s - according to the Halifax.
Earlier on Thursday, Sweden's central bank cut interest rates from 3.75% to 2%. • New car sales in November fell 36.8% on the year before - the steepest decline in nearly three decades according to the Society of Motor Manufacturers and Traders
• Homewares retail chain The Pier - which has 31 stores and 17 concessions across the UK - was placed in administration. It employs about 400 workers.
Central banks across Europe also cut rates in an effort to stem the economic decline. The European Central Bank cut its key interest rate to 2.5% from 3.25%, the biggest reduction in its history.
Earlier on Thursday, Sweden's central bank cut interest rates from 3.75% to 2% - a bigger-than-expected recuction.
'Bold but necessary'
This latest dramatic move by the Bank of England means that its Bank Rate is now at its lowest since November 1951- a year which saw the Festival of Britain and Winston Churchill become Prime Minister again.This latest dramatic move by the Bank of England means that its Bank Rate is now at its lowest since November 1951- a year which saw the Festival of Britain and Winston Churchill become Prime Minister again.
The 1951 Festival of Britain was in full swing the last time rates were this lowHetal Mehta of the Ernst & Young Item Club said: "You could almost hear the sigh of relief up and down the country. Anything less would have been a missed opportunity. The Bank has given the economy the right medicine at the right time. ALSO IN 1951... January-June, Korean War saw heaving fighting across the 38th parallelMay, King George VI opened the Festival of BritainOctober, the Conservatives won the general electionThe average house cost £2,100 A loaf of bread cost 6d (2.5 pence)
Hetal Mehta of the Ernst & Young Item Club said: "You could almost hear the sigh of relief up and down the country. Anything less would have been a missed opportunity. The Bank has given the economy the right medicine at the right time.
"Manufacturing and services surveys this week have confirmed that the recession is gathering momentum. At the same time, commodity prices have collapsed and inflation is set to fall dramatically, the dire prospect of deflation is becoming more likely.""Manufacturing and services surveys this week have confirmed that the recession is gathering momentum. At the same time, commodity prices have collapsed and inflation is set to fall dramatically, the dire prospect of deflation is becoming more likely."
Graeme Leach of the Institute of Directors welcomed the Bank's decision, calling it "bold but necessary".Graeme Leach of the Institute of Directors welcomed the Bank's decision, calling it "bold but necessary".
Ian McCafferty of the Confederation of British Industry said: "What is critical for business and consumers alike is that this reduction is passed on.
"The economy is stalling, inflation is expected to undershoot the Bank's own target and the headline rate of inflation is likely to turn negative for at least a few months in 2009," he said.
The CBI said it wanted to see lending by banks improve, to keep businesses working.
The British Chambers of Commerce (BCC) said that because of worrying signs that UK activity was falling sharply, it was "critically important" the the Bank to persevere with "aggressive" rate cuts.The British Chambers of Commerce (BCC) said that because of worrying signs that UK activity was falling sharply, it was "critically important" the the Bank to persevere with "aggressive" rate cuts.
"There is a clear danger that unemployment will increase even more dramatically without urgent counter-measures," said David Kern, of the BCC."There is a clear danger that unemployment will increase even more dramatically without urgent counter-measures," said David Kern, of the BCC.
And he strongly urged the Bank of England's monetary policy committee to cut interest rates by at least a further half a percentage point at its January meeting.And he strongly urged the Bank of England's monetary policy committee to cut interest rates by at least a further half a percentage point at its January meeting.
Stephen Robertson of the British Retail Consortium said: "This is exactly the type of decisive action we need during these uncertain times. With the threat of inflation fading, the Bank of England is right to concentrate on jump-starting the economy."Stephen Robertson of the British Retail Consortium said: "This is exactly the type of decisive action we need during these uncertain times. With the threat of inflation fading, the Bank of England is right to concentrate on jump-starting the economy."