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Bank of England cuts interest rates to record low of 0.25% following Brexit

Published 04/08/2016

The Bank of England has slashed interest rates for the first time in more than seven years and delivered an emergency package worth up to £170bn to ward off recession following the Brexit vote.

Policymakers voted unanimously to cut rates to a new historic low of 0.25% from 0.5% - the first cut since March 2009, when the Bank reduced rates at the height of the financial crisis.

It also unveiled a package of measures to boost a sharply slowing economy after the EU referendum vote, with the Bank revealing its biggest growth downgrade since quarterly inflation report records began.

The Bank believes the measures will see the UK avoid dropping into recession, but it warned of a "material slowdown", higher unemployment and falling house prices over the next year.

Its economy-boosting action will see it fire up the printing presses once more to expand its £375 billion quantitative easing programme by £60 billion to £435 billion - the first QE increase since 2012.

It is also buying £10 billion of corporate debt and announced a new scheme worth up to £100 billion to encourage banks to lend to households and businesses.

More rate reductions are also on the cards, with the minutes of the Monetary Policy Committee (MPC) meeting revealing that most members expect to cut rates to a "little above zero" by the end of the year if growth slows as expected.

The quarter-point rate cut is good news for home-owners, but spells further misery for long-suffering savers.

It will shave around £26 a month off mortgage payments for those who borrowed £200,000 over 25 years, according to the Council of Mortgage Lenders.

But for savers it will mean even lower returns on their nest-eggs after more than 1,000 rate reductions already during 2016 alone.

Online Editors

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