The Bank of England have slashed another third off the interest rates in the UK!

Interest rates were cut in January to an all time low of just 1.5%, but this record has just been beaten with the rate being cut today to just 1%.

Problems in the economy with retailers struggling and with an ailing housing market have pushed the Bank of England to take further action on interest rate. There were discussions that the rates could be cut even more than this with business leaders expecting a lower than 1% rate like in America, but this did not happen and we wait to see what might happen in March 2009.

The Bank of England has cut UK base rate to 2% from 3%, which is the lowest it has been since 1951.

This is great for the UK with what is going on, but will only be good for consumers and businesses if this latest interest rate-cut is passed on. Gordon Brown has urged banks to pass on this latest cut to their borrowers so that both home owners and businesses can reap the benefit of the Bank of England’s intention.

This is a big per cent cut in absolute terms and represents a “One Third” reduction from what rates were beforehand and is very encouraging.

Only time will tell whether this bold move will help the UK economy!

More savings accounts offering interest rates matching or exceeding the base rate are available to consumers than in previous years.

Some 28% of easy access accounts offer a rate of 5% or more, compared with 8% that offered rates equal to, or above, the base rate two years ago.

The figures from analysts Defaqto show that banks are trying to attract savers during the credit crunch.

Meanwhile, new guidelines have been issued to quicken the transfer of Isas.

The banking industry has agreed to speed up the transfer of cash between these tax-free accounts.

Deposits

Defaqto’s analysis showed that 28% of accounts were paying equal to or more than the Bank of England interest rate of 5% for deposits of £5,000.

“It is encouraging to see so many accounts offering attractive headline rates but savers need to keep their wits about them to avoid choosing an unsuitable account” David Black, Defaqto

Savings returns ‘beating’ shares

This compared with 21% at the same time last year, 8% in August 2006, and 19% in the same month of 2005.

But the group said that savers needed to be alert to the fact that relatively few accounts did not have any restrictions, such as when customers try to withdraw cash.

“It is encouraging to see so many accounts offering attractive headline rates but savers need to keep their wits about them to avoid choosing an unsuitable account,” said Defaqto’s banking consultant David Black.

Easy access?

Examination of 50 instant or easy access accounts paying the highest rates found that 15 of them limited the number of withdrawals or imposed penalties on some withdrawals.

Eighteen of them had introductory bonuses, which meant interest rates dropped after a set time limit expired.

Eleven of the 50 accounts had a minimum withdrawal of £100 or higher.

This left 19 out of the 50 that were free of withdrawal restrictions or introductory bonuses.

Isa boost

In a separate development, the bank and building society industry has issued guidelines to standardise the transfer of cash between Isa accounts.

This should cut the amount of time that it takes for customers to shift their cash to providers offering higher interest rates – a process that occasionally left consumers frustrated because it could take months.

The next stage is for the system to be computerised which would streamline it further.

The changes should be made “as soon as is practical”, the guidelines said.

News reported by The BBC