Following on from the dramatic interest rate cut in November, the Bank of England has again cut interest rates by a further one percent.  The Bank of England rate now sits at 2%, its lowest since 1951.

The move has again been welcomed and it is hoped that the cut will assist in kick starting the economy.

Gordon Brown has urged lenders to pass on the cut to homeowners and business, however many institutions have already confirmed that they will only be passing on a portion of the cut at best.  The UK’s largest mortgage lender, HBOS confirmed that it would only be passing on a quarter percent cut.  Many of the banks have capped their tracker rates and consequently borrowers will not feel the full benefit from the 1% drop.

The British Chambers of Commerce said that due to the worrying signs that UK activity was falling sharply, it was critical that the bank persevere with aggressive rate cuts.  Industry experts are cautious that without dramatic counter-measures unemployment will increase further and the economy will go into further decline.  

The suspected increases in inflation have not materialised and with the threat fading, the Bank of England is being encouraged to look at a further half percent cut in January.