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Interest rate cut to 2%
Thursday 4th December 2008, 12:01PM GMT.
The Bank of England has announced its decision on the interest rate – a one per cent reduction to 2%.
Economists believe cutting the interest rate to two per cent will help stave off deflation and stimulate lending.
It is the first time the rate has fallen to two per cent since 1951.
The interest rate had previously never fallen below two per cent in the entire history of the Bank of England.
A poll of economists for inthenews.co.uk last week showed analysts were split, with only five out of 11 economists predicting a one per cent cut.
However, data released this week suggested a large cut was likely, according to economist Howard Archer.
“Latest data and survey evidence point to deepening contraction in economic activity as well as rapidly diminishing inflationary pressures,” Dr Archer said.
“Consequently, there is a compelling case for the Bank of England to cut interest rates by 100 basis points from three per cent to two per cent, and this is what we expect the MPC to deliver.
“Indeed, it is far from inconceivable that the Bank of England could match last month’s interest rate cut and bring rates down to 1.50 per cent.”
Shop price inflation fell again in November, raising the possibility the consumer price index (CPI) will undershoot its two per cent target.
In addition, the purchasing managers’ survey for the services and manufacturing sectors show prices have fallen sharply amid declining activity.
Members of the MPC had signalled that more large cuts were on the way.
Bank of England governor Mervyn King has stated that: “We will take whatever action we feel is necessary on interest rates to steer the economy back into calmer waters.
“We may need to cut Bank Rate more than we would otherwise have done.”
However, lenders have warned further falls in the bank rate will have negative effects for savers.
As rates fall, people may feel less inclined to save, leaving less cash for banks to then lend out and hitting pensioners who live off their savings.
The Council of Mortgage Lenders (CML) has urged the government to issue guarantees on securitisations to kick start the mortgage market or risk net lending falling below zero next year.
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This seems so unfair to financially prudent savers like me.
In the good times, I practically live on bread and water, no TV, holidays or nice cars, and paid my mortgage off, whilst others borrowwed more and more living the high life.
Now I understand, as a tax payer I will be subsidising people who default their mortgages!
Theres no justice, I’ve paid mine off and now I’m having to pay someone elses off.
I’ve had enough of this country and seriously thinking of emigrating but the pound is now worthless against other currencies.
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Bah, humbug!
It’s not worth having any savings, in the banks, etc. these days. I suggest all people saving with these crooks (I include the state as well as the greedy banks) remove their monies and let these establishments find other sources for their waste.
I suppose though, they’ll just go back to the government again, cap in hand! ‘Please sir, may I have some more?’. ‘Yes, of course you may, you may have as much as you want’.
No strings attached either!!! After all, there’s always a big pot of money available to the really big debters (unlike the average man in the street)……. and it gets constantly replenished by the very people they’re screwing ….. the ever-gullible tax-payer!
Bah, humbug! …. and I thought I was tight.
It’s begining to feel like the good ol’days again. Now, where’s that work-shy skiver Cratchit? !!!
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The Government need to re-visit the restrictions they have placed on the banks and the capital ratios they have insisted upon, before the banks are going to be in a position to lend or pass on interest rate cuts.
No amount of stimulation is going to get things back to ‘normal’ until this is addressed and businesses are given a lifeline which helps them keep people in jobs. Even if there were credit available to householders, they are not going to borrow and spend unless they know their jobs are safe.
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Lucy W
You are not alone, the bright folk are starting to leave in droves.
There will be worse to come.
Things can only get better!!!
Boom and Bust is over!!!!
Apologise Bliar & Broon
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it is possibly best to have some of your savings in premium bonds. you cannot lose and you might win a big prize
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It’s pretty appalling isn’t it ? Punish savers and the prudent to support those who’ve been living beyond their means. Don’t think I’ll bother saving anymore it just isn’t worth it. May as well get a 10x salary liar loan and buy a house I can’t afford. If I default the Government will bail me out. I hate what this shower have done to our country.
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No pylons in this one Lucy so I can totally agree with you and given a few years younger I would be away like a flash. Paid off my mortgage by responsible saving all my life, a few pounds in the bank, using the interest to subsidise my pension and I see this meagre interest more than halved in two strokes of an interest rate cut.
But you watch, pensioners have never been treated well by this lot (remember the one off Council Tax con when they got into power) there will be no soft cushions for us, pensioners are an encumbrence, the forthcoming £60 is an insulting sop, we need a substantial increase in the basic state pension not little one off dribs and drabs that are a straight attempt at bribing us but I for one won’t be taken in.
Yes, you have realised it Lucy, welcome to the world where pensioners who have paid off their mortgage by thrift, prudence and responsibility now have to pay through their taxes for the people who find themselves in trouble – they call this socialism and the party that practices it are New Labour.
Be careful where you go to though, they have a way of stinging you even if you go abroad, it’s only if one goes to certain countries that the State pension is increased yearly, pensioners who go to some other countries get a fixed pension without any increases.
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Stuart: Well I’m still of working age. Had a colleague who went to New Zealand 2 years ago and said I should have gone at the same time, as I have spent alot of time there and have a few friends. People say all this mess was unforseeable, but my friend foresaw it. He said UK was going down the pan with Labour.
I really regret it now as the pound has fallen, I couldn’t buy anywhere like the property in NZ that I could have 12mths ago. I couls have broughta rural property with 20 acres, now I would only get two!
Great place NZ, low tax, low crime and I can’t recall any pilons. However they do have very strict speeding and drink driving enforcement down there – afterall NZ invented the radar camera.
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get your money in gold sovereigns and old dinky toys
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Typical, Took out my Mortgage in the early 80s with interest rates in the mid teens. Flat broke for the first 10 years but worked for the house and finally started to get ahead of the game. Just finished my mortgage with a nice little bonus to add to my hard earned savings and as Lucy said I am now expected to subsidise somebody else’s payments.
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I am so fed up of hearing about these cuts being passed on by the banks – what can you do if your provider isn’t passing them on? My mortgage is with Egg, and for various reasons I need to stay with them, and they haven’t passed on anything yet. I feel there should be more of an outcry on behalf of people like me!
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in january interest rates may be down to 1% or lower! stand by for the eu trying to get us to adopt the euro, no way jose
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With interest rates so low, I might as well withdraw my savings buy a foreign car now before the pound gets any lower, and the Government can replenish my savings that come out of our system to go abroad from whereever.
Sorry I’m not too patriotic, but this Government has done sod all for me while savers like me have kept the system afloat – so sod ‘em !
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to lucy w
NZ is cold and always raining just like uk you’ll love………….
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Don’t be put off Lucy, I have many, many relatives in NZ North Island, been there twice, we went in their summer, January when the weather was georgeous, picking grapefruit in my cousins back garden – can we do that here?. I can manage the lousy weather in UK but what I can’t manage is everything that this lousy government has brought about. I feel as if my voice and views are unheard, democracy has been stifled, the country has been thrown wide open to every Tom, Dick and Harry in the world, corruption, spin and deceit in government is rife and to crown it all we now get the whole world being blamed for our own financial incompetence which we are being made to grin and bare it. NZ may have horrible weather in some parts but one thing they don’t have is a way of life like ours and a compliant population that swallows everything that they are told and just turn over and accept it. 20 years younger and wild horses wouldn’t hold me in this dump, and, from what I gather, there are many more like me.
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lucy you can always buy a foreign car but one made in this country, you would be saving british jobs and saving 2.1% vat off the price, indeed if you were paying cash ask for a 22.5% discount
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we own them – simple answer is to pull out all OUR money now give it back to US in tax cuts and let the banks that are poorly run go to the wall, its free market economics, get used to it, the socialist government is ruining this country with its do gooding, lets get the money back for good and get this clown brown out at the next election, more money in my pocket is what the economy needs, not in the treasury or in the bank!
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So I assume that many of you would prefer to see the 15% interest rates we saw in the 1980s and early 90s?
This is not about subsidising those who have been irresponsible with their borrowing – it’s about protecting ordinary working people, many of whom took out reasonable mortgages but who now risk losing their jobs due to the irresponsible and insatiable greed of global capitalism, and specifically US banks.
It’s tragic that so many seek to blame their fellow workers for recession rather than laying the blame at the door of the corporate thieves who caused all of this.
You certainly don’t protect British jobs by raising interest rates in a recession. The current low interest rates, combined with a pound which looks like good value to foreigners will hopefully put British manufacturers in a position to recover from the recession earlier than our competitors.
And it’s not just Britain who is reducing rates. Economists the world over are doing it – because this is not a home-grown recession – it’s a genuine world-wide one.
So go somewhere else if you like – but sadly your savings won’t do any better there either.
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Love it when the interest rates come down still have a mortgage and son at Uni so my savings are very short term at the moment, have some sympathy with savers but in the end you have to look at your own interests excuse the pun :-)
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But all the money from UK cars goes abroad. Landrover/Jaguar to India, Aston Martin to the Middle East and Jap cars to the Land of the Rising Sum. At least with German cars we are helping our fellow Europeans who we have so much in common with.
When Britain can make a car that is value for money they I will consider one, manwhile I intend saving a Czech Republic workers job – their need is greater and they work harder building better cars.
‘Love thy neighbour’, Leviticus 19:18
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Stuart: Re #15. I have been several time to NZ, North and South, touring and staying with friends. There culture is different to ours, some say they are 50years behinds us. I know they are racist in a nice way like our Grannies used to be, but at least they dont have the problems with culture clashes as they are selective who they let in.
You may have to pay to see the Doctor in NZ but is that a bad thing? You also dont see many obese people there either, they have a very outdoor life style.
I went up Mt Holdworth and the sign warns walkers and bikers to wear bright clothing so the wild boar hunters dont shoot you, and to watch out for horses that may panic from the hounds. Everyone just gets along with one another without H&S spoiling everything.
Now can you imagine that on the Wrekin? “A place for everyone to enjoy” as Mt Holdworth says?
They have toilets on Mt Holdworth at little Tramping Huts, but they are Long Drop, i.e. off the edge of a cliff. Suppose its necessary when it takes days to cover the area, but why do the Friends of the Wrekin need toilets? They can go behind a tree or hang on for the 2hrs it takes to up and down the Wrekin. Its just pathetic, honestly *tut*
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Peter, there was an article in the paper the other day, comparing the surrounding consequences of a 15% and a 2% interest rate. Fact, more people are losing and are likely to continue to lose their homes now than what they did then (before Brown took the latest step to save them and we wait the results of that little ploy). So, please, no propaganda that the loss of homes was worse then, the present housing situation in terms of selling, buying, repossessing, mortgaging are certainly worse now than they were then. The whole building and housing scene is in utter disaster and chaos.
As for the value of the pound, yes, great for foreigners but why are they not buying all our goods to put us back on track again. Answer, there is little for them to buy in the vast quantities this country needs to benefit us – look at JCB, our businesses are folding, there is no liquidity, banks won’t lend for raw materials to be purchased and the purchasing power of the pound is so exorbitant that our businesses can’t afford to buy the raw materials to produce and keep themselves going even if the banks would lend it. How does this do British jobs any good?, the predicted unemployment rate is 3.2 million by the time we are at the lowest point of this “bust”. The theories of “economics” dictates that what goes around, comes around and every aspect is “interlocked”, good or bad. Then let us look at the man in the street, the ordinary, average guy who perhaps wants to go to his wife’s relatives over Christmas – like me who has gone to Ireland for Christmas for the past 7 years but can’t afford to go this year because of the low value of the £. Look at the pound against the Euro, they started off when the Euro came into being at E1.50 to the pound – now they are almost on a par, indeed a guy in the paper was recently given 58 Euros for £60 Sterling.
You fly in the face of every credible European economic authority when you say we will come out of this lot earlier than our competitors, they all say that we will be hit hardest and deepest and it will take us longer to get out of it. You also come out with the same old tired comments of Brown and Darling, “no, we didn’t do it guv, it wasn’t us, it’s all the fault of the banks and America”. Utter rubbish, Brown and Bliar allowed the banks to get away with blue murder, if they had regulated them properly they wouldn’t have loaned to and borrowed from US banks so much.
You tell us, which country in Euro land has lower Interest rates than us with the potential to go even lower. – None.
The disaster that we now find ourselves in can be put straight at the feet of Bliar, Brown and darling. NO MORE BOOM AND BUST REMEMBER.
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Peter can still work. Low interest rates are not securing those who are losing their jobs or companies who are closing (in fact the opposite is true). However, pensioners cannot work – that is the point Lucy was first making- and rely on their savings. What do you want? For pensioners to spend all their savings and live on the state? Because clearly this is what New Labour want, only we know what will happen. Not content with this (I can see the Peters of this world moaning about pensioners scrounging off the state – these people like my mother who carefully saved and went without all her life) by taking away her home. So yes, I would personally prefer the interest rates to be 15% rather than 2% to protect those in their 80s who are now SO worried about how they are going to live and who are regarded, pathetically by the likes of Peter – as rich. I can tell you, if my mother lived on her savings, within 5 years they would be used up, and what should she do then? Die, I suppose.
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Boudicca, every single word you write is the god’s honest truth and I support eveything you say. As a pensioner, I can see myself having to live off my small capital which will rapidly be eaten up and then, irrespective of what interest rates are, there will be no savings left to earn interest. It goes much deeper than that though, I know pensioners in my group who have saved barely enough to bury themselves with and until the grim reaper calls they supplement their means tested, derisory state pension with a few pounds interest from their burial savings. If they have to use that to live on – I suppose a paupers funeral is the answer. What on earth have we come to in this supposedly modern day and age, we are going back to the “workhouse” if it continues. And still people defend Bliar, Brown and Darling.
How dare anyone defend this New Labour government to me, I can say what the real truth is – and it is not pleasant after 11 years of insults to pensioners.
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Biudica: You made a good point about pensioners scrounging off the state – thats what my Dad has done. Because his saving were giving him such a small return, he gave them away and as a result of being poorer can claim more in housing benefits etc than he got in interest. I would imagine that many more families are doing the same – it may morally wrong, but thats just the way it is.
Stuart: Look into the benefits of “giving your money away”. There is someone at the council who comes out to help you with the forms – they are very helpful and dont pass judgement.Hopefully you have family or friend you can “give” it to who would hold onto the money “just in case”, although at law it would be theirs to do with as they please – so you need trust and an “understanding”. Good luck.
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That takes courage Lucy – and that is a commodity I singlarly lack when it comes to money. It is certainly an innovative idea though and I would not be critical of any pensioner who had paid his/her way to obtain a reasonable old age only to have it taken away away by this Government if they were to do it. Certainly there are now no incentives to save for ones old age and you can’t blame the OAPs who play the system, after all, everybody else, including MPs seem to be doing it.
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