The Bank of England (BoE) has announced an emergency cut to the base interest rate to stabilise the economy amid the coronavirus outbreak.

The Monetary Policy Committee (MPC) voted unanimously to slash the bank rate by 0.5 percentage points, from 0.75% down to 0.25%.

The BoE suggested that although the magnitude of the economic shock from the coronavirus remains highly uncertain, activity was likely to weaken in the UK over the coming months, and that a cut would free up billions of pounds of extra lending power to help banks support firms.

Outgoing BoE Governor, Mark Carney, made the announcement to take borrowing costs back down to their lowest levels in history at a press conference this morning, with further measures to combat the coronavirus outbreak and support economy growth expected to be unveiled by the Chancellor during the Budget announcement later today.

AJ Bell personal finance analyst, Laura Suter, called the change a ‘swift move’ from the BoE in an attempt to support the UK economy amid the coronavirus turmoil, but suggested the vote to cut rates would ‘shock some at how quickly it happened.’

She commented: “The move, which takes rates lower than in the financial crisis, is the first unscheduled interest rate change from the BoE since the banking crisis 12 years ago. The cut to 0.25% also leaves minimal ability to slash rates further in the future.

“The move is coupled with support for businesses, with a new term funding scheme and relaxing bank credit rules to get more help to businesses, in an attempt to help small companies through the disruption, slower sales and potential shutdowns that may be caused by coronavirus.

“This gives an indication of what is to come in Rishi Sunak’s first Budget later today, with further help for businesses and even a business rate holiday suggested as a helping hand for companies.”

Commenting on what the rate cut could mean for the mortgage market, Mortgage Market Alliance director, Rob Griffiths, said: “The bank clearly wants to stimulate the flow of lending out to consumers and businesses and for those seeking a new mortgage or looking to refinance, this is now an opportune time to do so.

“While many lenders’ cost of funds and pricing will not be directly linked to bank base rate, this is still likely to filter through to mortgage rates at some level, which means what was an already highly-competitive market has just got even more so.

“There are likely to be a considerable number of changes in mortgage pricing in the days to come and it’s important that consumers have access to the whole of market – by all means check online and consider what the existing lender has to offer, but at that point it would be prudent to use an adviser to ensure you get the best possible rate and the most suitable mortgage for your needs.”

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