Bank cuts interest rates by 1%

12:55pm Thursday 4th December 2008

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© Press Association 2008

THE Bank of England has slashed interest rates by another one per cent as policymakers stepped up their battle to stave off a deep recession.

The dramatic percentage point cut takes the cost of borrowing from three per cent to two per cent - a rate not seen since 1951 and equal to the all-time record low in the UK.

It follows last month's shock 1.5 percent cut - the biggest for more than 27 years - and comes amid mounting concern that the UK is facing a deep and prolonged recession.

Britain's biggest mortgage lender Halifax confirmed it would pass on the cut to its 600,000 borrowers with base rate tracker deals.

But it is unlikely that all borrowers with standard variable rate mortgages will see the full benefit, despite increasing pressure from the Government.

The Bank said in a statement accompanying its decision that "there remained a substantial risk of undershooting the two per cent Consumer Prices Index inflation target".

It added: "In the United Kingdom, business surveys have weakened further and suggest that the downturn has gathered pace.

"Consumer spending and business investment have stalled, while residential investment has continued to fall."