UK Interest Rate: 1.0%

UK Interest Rates Forecast: A cut to 0.5% is still possible

Bank of England Cuts Rate to 1.0% - Lowest Ever

The Bank of England has cut the Bank Rate by a further 0.5% to just 1% - the lowest level ever in the Bank's 315-year history.

A number of major mortgage lenders immediately indicated that they would lower their variable interest rates by the full amount - a contrast to previous cuts, when many lenders have been more reluctant to do this.

Borrowers with tracker mortgages should also see a reduction unless their mortgage lender operates a 'collar' - a minimum interest rate below which the tracker rate cannot fall.

How Much Lower Can Rates Go?

The question on everybody's lips now is "is this the final cut?"

The answer, it appears, may be no.

The tone of the Bank of England's statement suggested that the Monetary Policy Committee may yet make a further cut, perhaps taking rates as low as 0.5%.

The statement said, "inflation is expected to fall below the 2% target by the second half of the year". However, the MPC was concerned that there was a "substantial risk of undershooting the 2% CPI inflation target in the medium term" if interest rates were not lowered again. This concern led to the MPC's decision to cut the bank rate from 1.5% to 1.0%.

The phrasing of this statement - and the Bank's observation that the "global economy is in the throes of a severe and synchronised downturn" has led some economists to believe that further cuts may still be on the cards. Talking to the FT, Goldman Sachs' Kevin Daly said that the MPC's statement "does not sound like a committee that is finished easing policy."