A 0.5% reduction was widely expected despite the growing clamour to hold rates at 1.5% from trade bodies and economic commentators.
Some economists have branded the interest rate mechanism as a blunt tool in turning the tide of the recession, preferring instead measures of quantitative easing.
This would involve the BoE artificially boosting the money by buying up assets such securities and corporate bonds.
The Building Societies Association warned against cutting rates further this week in a bid to protect the interests of savers.
The trade body argues that it is not logical to hit savers with rate cuts when they represent the one group who may be able to buy and resume the process of lending.
Adrian Coles, director-general of the BSA, says: “Mortgage availability, rather than the cost of mortgages, has become a more pressing issue over the last few months.
“This suggests that what is important to potential borrowers is maintaining the flow of mortgage funds to the market rather than reducing interest rates further.”
He adds: “We need to ensure that those with at least some capacity to supply funds for mortgage lending – personal savers – are encouraged to do just that.”
There are also fears that borrowers will hold out for better deals in line with their expectation that rates will fall below 1%.
Research from Unbiased.co.uk shows that many consumers think rates won’t bottom out until March.
The data also reveals that the average three-year fixed rate borrowers are willing to commit to is 3.86%.
This is only marginally lower than the current best three-year fixed rate available at 3.99%.
David Elms, chief executive of Unbiased.co.uk, says: “Even without today’s rate cut, interest rates were 4% lower than a year ago.
“With rates so low and further cuts likely to have been priced in by lenders, borrowers need to ensure they don’t lose out by holding out too long for falls which may not come.”
And Ben Thompson, director of mortgages at Legal & General, warns that the Bank of England is prescribing the wrong medicine for the market’s woes.
He says: “Today’s cut will only help a fortunate few borrowers and it certainly won’t help savers or pensioners.
“Banks need to attract savers more than ever before with the offer of a good return on their funds, but this relaxing policy by the Bank of England is making things worse.”
Barry Naisbitt, chief economist at Abbey, adds: “There cannot be many people who thought just six months ago that the Monetary Policy Committee would cut interest rates to just 1%, their lowest ever level.
“But today’s decision of a further 0.50% Bank Rate reduction does that.
“The past few months have clearly seen a series of extraordinary measures, reflecting the rapidly deteriorating economic and financial situation in the UK and globally.
“The minutes of the January meeting hinted at this further reduction and so markets will be keenly awaiting the minutes of this meeting and the Inflation Report to see if the MPC is considering further action in the months ahead.
“The cut should help to bolster consumer and business confidence at a clearly very difficult time in the economy.”