The Bank of England has slashed interest rates by a further 1.5% to boost Britain's ailing economy.
Following an emergency 0.5% cut in October, the Bank’s Monetary Policy Committee (MPC) has taken drastic action again as its focus switches from inflation to recession.
Britain’s basic rate of interest now stands at 3%, but it is unclear how much impact this will have for households and businesses.
The Council of Mortgage Lenders (CML) has already said its members are unlikely to pass on the rate cut to borrowers.
In a statement issued last night, the CML said: “It is important to allow for the fact that in the post-credit crunch environment, where Government and regulators expect lenders to operate lower-risk and higher-capital lending businesses, the pricing of mortgages relative to benchmark rates is highly unlikely to return to the very narrow margins of the pre-crunch era.
“And lenders will need to take account of the possibility of higher provisioning and losses in an environment of higher arrears and possessions. A decision not to follow a base rate reduction does not imply that the lender is ‘profiteering’.”
Further cuts are expected in the coming months, and some economists believe the MPC may reduce rate as low as 0% to try and stimulate the economy and reduce the effects of recession.
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