At a special meeting today the Bank’s Monetary Policy Committee voted unanimously to cut Bank rate and increase its holdings of UK government and corporate bonds by £200 billion to £645 billion.
The Committee also voted unanimously that the Bank of England should enlarge the Term Funding scheme for SMEs (TFSME), financed by the issuance of central bank reserves.
Alex Maddox, capital markets director at Kensington Mortgages, commented: “The Bank of England is taking out the big guns. The rate cut is mostly just a signal – trimming another 15bp to 0.10% will have a negligible impact, as rates are already so low.
“What will make a big difference are the two other measures announced by the bank – a massive 45% increase in the Quantitative easing programme to £645 billion, and even more money to the funding schemes that can get cash to consumers and small businesses.”
Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco, said: “This dramatic rate cut by the Bank of England is ultimately a symbolic one but it shows the absolute carnage that Covid-19 is wreaking across the UK and global economy.
“For the Bank of England to cut rates right to the bone highlights the extraordinary times we are living in.
“With UK interest rates now at their lowest level in history, we expect a surge in enquiries about what this means from existing and prospective mortgage borrowers.
“Those on a tracker product will see an immediate benefit, but fixed rates are unlikely to be cut much further.
“Lenders have their own issues to deal with as many of their staff are off or working from home so this is unlikely to translate into cheaper rates across the board.
“We are already seeing some lenders, especially more specialist mortgage providers, increase their rates to protect their positions.
“In the current climate, lenders need to preserve their margins more than ever, if not bolster them further.
“For anyone looking at remortgaging within the next six months, now is categorically the time to get on with it.”
The next regularly scheduled MPC meeting is on 25 March.
