Good news for mortgage customers as Bank of England cuts interest rates to 1.5%

The latest efforts to assist an economic recovery has seen the Bank of England cut interest rates for the fourth time since October 2008, so that the base rate now stands at 1.5%. The reduction of half a percentage point means that, for the first time since the Bank of England was founded 315 years ago, interest rates have fallen below 2%.

The Bank said that the decision to cut interest rates was based on the increase in the level of contraction in business activity during the last quarter of 2008, adding that "output is likely to continue to fall sharply during the first part of this year." The Bank also explained that retailers' surveys, as well as reports from its regional agents, implied weakened customer expenditure.

The news of this latest interest rate cut looks set to be welcomed by many mortgage customers, with the majority of borrowers on a tracker mortgage automatically having the reduction passed on to them. However, those homeowners who have a standard variable rate (SVR) mortgage deal will need to wait for their bank or building society to reach a decision as to whether they will pass on some or all the reduction, if at all.

Anyone who has a SVR deal with the Nationwide, Skipton Building Society, Lloyds TSB, HSBC or HBOS will be interested to know that these lenders have already confirmed that they will be passing on the cut, in full or otherwise.

Source: bbc.co.uk | Last updated: 8th January 2009

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