Current UK Interest Rate: 1.5%

Summary

UK Interest Rates Forecast: Further cuts possible in February later cuts also possible - perhaps to as low as 0.5%

The rate cut on 8/1/09 brings the Bank of England's interest rate to the lowest ever level in it's 315-year history.

This is the fourth drop in rates since October in an effort to combat the economic problems.

The recent cuts have been:

8 Oct interest rates lowered by 0.5 Percentage Points to 4.5%...

6 Nov interest rates lowered by 1.5 Percentage Points to 3%....

4 Dec interest rates lowered by 1.0 Percentage Points to 2.0%...

Analysis

Interest Rates Cut Again

At their first meeting of 2009, the members of the Bank of England Monetary Policy Committee voted to cut the base rate by a further 0.5%.

This leaves the Bank Rate at 1.5%. This is the lowest ever level in the 315-year history of the Bank of England - previously it has never fallen below 2%.

Will Mortgage Rates Continue To Fall?

Maybe.

If you are on a tracker mortgage, then your rate may well fall again - as long as you are not a customer of one of the lenders who has a collar on its tracker - a minimum rate.

If you are on a variable rate mortgage, early indications are that many lenders are reducing their variable rates, but not always by the full 0.5%. This means that you should see your payments fall from next month.

If you are on a fixed rate mortgage, your rate will not change until you reach the end of your fixed rate period. You will then have the choice of going onto your lender's variable rate or remortgaging onto a new deal.

What Next For Interest Rates?

All the indications are that the base rate is likely to be cut again in 2009, perhaps as low as 0.5%. Businesses are still suffering from a lack of available credit (at any price) and the Bank of England will do everything possible to try to encourage banks to start lending to businesses again.

However, cutting interest rates may not be enough - however low rates go. Experts expect that the next stage may be for the Bank of England to start putting more money into the economy - possibly by giving it to banks to lend.

This point was made by David Smith of Dreweatt Neate estate agents in an interview with The Guardian: "It's not the rate at which money can be borrowed that matters so much right now, it's the supply of money – and that supply simply isn't there."