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Saturday 07th of March 2009
March 5, 2009

Further blow to savers as UK interest rates cut to 0.5%


by Kay Murchie
”Further

As widely expected, the Bank of England has lowered interest rates to a new historic low of 0.5% as it continues its attempts at stimulating the economy.

Since October, interest rates have been cut six times in a bid to fight off the recession but the latest cut has been widely criticised since they have done little, if anything, to kick-start lending.

Meanwhile, savers suffer in the wake of cuts and earlier this week the Building Societies Association said further cuts to the base rate would be an ‘assault’ on both savers and borrowers.

Commenting on today’s cut, Ian McCafferty, CBI chief economist, said “it is unlikely to have a dramatic impact on the cost or availability of credit.”

In the meantime, the Bank of England is proceeding with quantitative easing (also known as printing money) - a process whereby the Treasury injects funds into the financial system to ease pressure on banks by giving them extra capital. The aim is to increase lending levels in commercial banks.

Earlier today, Chancellor Alistair Darling gave his permission for taxpayers’ money to be put at risk in order to press ahead with quantitative easing.

Many economists believe that the process could assist in the recovery of the economic downturn.

In related news HBOS, which is now part of the Lloyds Banking Group, has today reported that house prices fell by 2.3% in February, taking the average UK home to £160,327.

The latest monthly fall takes the annual fall to 17.8%, according to the lender.

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