The Bank of England has cut interest rates by one percentage point, from 3% to 2% – the lowest level since 1951.
The last cut, an emergency 1.5%, was intended to stimulate spending and stave off recession but the economy has continued to suffer.
The CBI said it was “critical” that banks now passed on the reduction to businesses and other customers. While banks are expected to cut the interest they pay on their savings accounts, no decisions have yet been made. HBOS has committed to passing on the full cut on all tracker products while other lenders have yet to reveal the action they will take.
The Royal Bank of Scotland said it would be passing on the cut in full to its small business customers. Lloyds TSB/Cheltenham & Gloucester said they would be passing on the rate cut to small business and mortgage customers, while HSBC and Skipton said they would be cutting their standard variable mortgage rates .