The Bank of England has slashed the base rate to 2% a level not since 1939.
The last cut, an emergency 1.5%, was intended to stimulate spending and stave off recession.
Adrian Coles, director-general of the Building Societies Association, says: “Homeowners will welcome the MPC’s decision to cut the Bank Rate by 100 basis points to 2%. However, not all mortgage borrowers will find today’s fall mirrored by their lender – building societies have to balance the interests of borrowers and savers. Although low interest rates are good news for borrowers, they are not so good for savers.”
Michael Coogan, director general of the Council of Mortgage Lenders, says: “Lenders want to help their borrowers, both those who are in difficulty and those who are not. This will help to support the wider economy, and ultimately strengthen their businesses too.
“But the practicalities are complex, and lenders are trying to achieve a range of potentially conflicting objectives at the same time.
“They are simultaneously trying to build up greater levels of capital and liquidity, help borrowers in difficulty and reduce repossessions, keep rates as low as possible for borrowers and as high as possible for savers in a very low interest rate environment, support new lending, and pay the significant costs of the recapitalisation scheme which have fallen across a wider range of lenders than just the recapitalised banks themselves.
“As we have said before, not all lenders are the same. It is not realistic to expect them all to react in the same way to the rate cut – although where they believe they can cut mortgage rates, they will. To achieve its objectives to support the housing market, the government needs to engage with all lenders, not just the very largest, and we look forward to helping with this.”