Base rate cut to 1%

The base rate fell to 1% today, as the Bank of England continued its efforts to encourage more lending and revive the economy.

The base rate now stands at its lowest level since the Bank of England was established in 1694. This was the second successive 0.5% drop, and the eighth consecutive cut since December 2007.

In recent weeks, several leading analysts have expressed doubts with regard to the effectiveness of more base rate cuts, with many arguing that cutting the base rate is no longer an effective means of encouraging lenders to offer more loans.

Analysts have also said that savers could be at risk, since the cut is likely to take their interest rates well below the rate of inflation – meaning that they could ‘lose’ money in real terms.

A spokesperson for debt management company Gregory Pennington said: “For those who rely on interest from savings to supplement their income, this base rate cut could pose a problem. Some may have to get into debt, or use some of their savings, in order to meet their commitments.

“Economists have predicted tough times for the economy this year – so it’s essential that consumers tackle problem debts early.”