Bank of England cuts interest rates

UK homeowners received a much-needed boost today after Bank of England policymakers cut interest rates for the second time in three months.

The Bank’s nine-strong Monetary Policy Committee (MPC) voted to trim rates by a quarter-point to 5.25% amid growing signs of a slowdown in the economy and a cooling housing market.

But hopes of a more dramatic cut were dashed, despite calls from retailers for a reduction to 5%.

Today’s decision to shave rates will reduce monthly repayments on a typical £100,000 (€133,356) mortgage by around £16 (€21.33) a month to £722.80 (€964.24), based on a new rate of 7.25% .

Those who are heavily mortgaged with a home loan of £250,000 (€333,415) will see around £40 (€53.34) knocked off their monthly repayments. It comes at a time when homeowners are faced with rising petrol, energy and food costs.

The Bank recently hinted that borrowers expecting similar cuts to those seen last month in the US would be left disappointed.

The US Federal Reserve slashed rates by 1.25% in less than two weeks in an attempt to stave off an economic recession.

Rising inflation on this side of the Atlantic has left policymakers with a difficult task.

Oil prices surged to record highs this year and households are also facing steep hikes in energy bills, with E.ON today becoming the latest to increase gas and electricity prices.