moneysupermarket.com: Bank of England interest rate cut

Commenting on the Bank of England interest rate cut to 3 per cent, Kevin Mountford, head of banking at moneysupermarket.com said: "The decision to cut rates by 1.5 per cent is a major shock tactic by the Old Lady to try and kickstart the economy and sidestep the almost inevitable recession. Although it is great news for some homeowners, it's a devastating blow for savers who will undoubtedly see the rates on their savings accounts slashed. Having said that, the silver lining may be that cash strapped banks will still be competing to get retail money in, and therefore some may not pass on the base rate cut in full in an attempt to maintain competition for those all important savings deposits. There are still one or two 7 per cent plus deals to be found if you're prepared to lock your money away for a fixed term but savers need to move quickly as today's news will surely led to these sorts of rates being banished to the history books, in the short-term at least."

Louise Cuming head of mortgages at moneysupermarket.com, said: "Today's move couldn't have come at a better time for many homeowners, and is a far greater step in the right direction than many of us had expected.

"There have been a clamour of political voices over the last couple of days calling for the banks to pass on last month's cut in full, so the MPC's move today has put the banks under serious pressure to alleviate their customers' suffering. If you're one of the 4.2 million borrowers on a tracker, congratulations, you are about to see your monthly mortgage repayments fall. But if you're a new borrower trying to get a tracker, you're likely to be too late as lenders across the board are pulling their best tracker deals.

"But - and there's always a 'but' any time rates are cut - while we may see some cursory reductions on mortgage rates trickling through, the majority of borrowers on SVR's should not expect to see a fall of anything as big at the rate cut. A cut in the base rate, even a pretty gargantuan one as we've seen today, won't necessarily encourage lenders to start lending again, and they may well take a much more conservative approach whilst building up funds. Until lenders begin to lend and not hoard their cash in their coffers, the problem remains the same. Lending criteria won't change just because the Bank of England has finally woken up to the prospect of the R word."