Bank slashes Base Rate from 0.75% to 0.25% in bid to bolster economy.
The Bank of England has announced an emergency cut to the Base Rate of interest.
The rate has dropped dramatically from 0.75% to 0.25% – the joint-lowest it has ever been set – in a bid to boost the economy, primarily due to fears over the impact of the Coronavirus.
It has also confirmed it will make billions of pounds available to help banks support businesses that urgently need access to finance.
Global markets around the world have been rocked by the virus, with the FTSE 100 dropping more than 7% on Monday before flattening out yesterday, and the Bank clearly felt the need to be proactive and ease the nerves of businesses and big investors.
The shock move by the Bank of England likely paves the way for further Coronavirus-related initiatives in the Chancellor's Budget speech this afternoon (we'll be sending out a roundup to newsletter subscribers of what that means for your money later on).
Businesses will welcome decisive @bankofengland action.
— Adam Marshall (@BCCAdam) March 11, 2020
Now BoE & banks must work to ensure this translates into real-world support for firms on the ground.
Banks must do all they can to help firms whose cash flow has been disrupted by #coronavirus.https://t.co/35ivOrzJwc
What it means for savers: act fast if you're worried
Such a sharp drop in the Base Rate could prove a big blow to savers, most of whom are already struggling to beat inflation.
If the rate cut proves shortlived, the impact will hopefully be limited, but if this becomes the new norm then rates could hit rock bottom and stay there for some time.
If you're worried about falling rates, you may still be able to bag one of the current deals if you act extremely quickly.
Most Base Rate adjustments are widely expected and give banks plenty of time to adjust their savings rates accordingly.
As this has caught pretty much everyone by surprise, you might be able to grab one of the current top deals before they are pulled.
Bank of England base rate is cut to 0.25% from 0.75% savings rates will go down too
— 🄼. (@mightbemiz) March 11, 2020
At the time of publishing, we were still able to begin the application process on a number of the best-paying fixed-rate accounts out there.
Here's our roundup of the top savings rates, which was last updated on Monday, or you could just look up offers on any of the various price comparison sites out there.
We can't guarantee you'll get any of them but it's definitely worth trying if you have cash that you were considering locking away anyway.
Please do let us know in the comments section below if you were successful in opening an account this morning.
What it means for borrowers
If you're on a tracker mortgage, today's announcement will likely be a massive boost: a borrower with a £150,000 mortgage spread over 25-years will see their repayments fall by more than £400 a year.
Now, it's worth repeating we don't know how long this rate cut will be in place for but, for the time being, these borrowers are quids in (assuming their lender doesn't have any nasty fine print preventing their rate from dropping the full 0.5%).
Those on other variable mortgage products could also benefit, but it could take some time for reductions to filter through – and there's no guarantee that they will.
Those on fixed-rate deals (which is most of us) will be unaffected for the duration of their fix as their rates are obviously set in stone.
Big cut in UK interest rates - have my doubts how much will be passed on to mortgage borrowers
— Steve Webb (@stevewebb1) March 11, 2020
What might happen to mortgage rates in the near future for those looking to buy or simply remortgage is unclear.
While banks are generally very, very quick to take the axe to savings rates when the Base Rate falls, they aren't in quite the same rush when it comes to borrowing rates.
Logically such a big cut – and can we once again stress it matters how long the rate remains at this low level? – will mean cheaper mortgage (and loan and credit card) rates.
However, it's worth noting that, with many lenders already pushing home loans of around 1%, there isn't a lot of room left for them to fall.
What do you think of the decision to cut the Base Rate? Justified or an overreaction? Share your thoughts in the comments section below.