Base rate slashed to historic low in response to COVID-19 pandemic

The Bank of England has cut the base rate for the second time since the coronavirus outbreak began.

It has slashed the rate from 0.25 per cent to 0.1 per cent in an emergency move.

Interest rates are now at the lowest point in the Bank’s 325-year history.

In addition, the bank is set to increase its holdings of UK government and corporate bonds by £200bn in a bid to lower the cost of borrowing.

The Bank of England stated: “The spread of Covid-19 and the measures being taken to contain the virus will result in an economic shock that could be sharp and large, but should be temporary.”

The business community across the country has reacted to the news.

Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco, commented: “This dramatic rate cut by the Bank of England is ultimately a symbolic one but it shows the absolute carnage that Covid-19 is wreaking across the UK and global economy.

“For the Bank of England to cut rates right to the bone highlights the extraordinary times we are living in. With UK interest rates now at their lowest level in history, we expect a surge in enquiries about what this means from existing and prospective mortgage borrowers.

“Lenders have their own issues to deal with as many of their staff are off or working from home so this is unlikely to translate into cheaper rates across the board. In the current climate, lenders need to preserve their margins more than ever, if not bolster them further.”

Suren Thiru, Head of Economics of the British Chambers of Commerce (BCC), said: “The decision to cut interest rates to their lowest ever levels and restart quantitative easing reflects an increasingly dire near-term outlook for the UK economy.

“This may give a short-term boost to market confidence, but will have little long-term effect unless it translates to practical support for businesses.

“It is critical that the Bank of England works with financial institutions to ease cash flow challenges for firms on the ground in this increasingly turbulent period.”