Bank slashes interest rates

Interest rates have been cut by 1.5 per cent, in a shock decision from the Bank of England.

The Bank rate now stands at just three per cent – the lowest since 1955.

Analysts'' predictions had suggested that a 0.5 to one per cent cut was on the cards.

However, the policymakers said that there was a "marked deterioration in the [economic] outlook" in the UK, requiring drastic action.

The move has been welcomed by analysts.

Michael Coogan, director general of the Council of Mortgage Lenders, said: "[The bank has] grasped the nettle in a worsening recession environment.

"What is important is how this feeds through to lenders'' borrowing costs – and lenders will need to balance the interests of savers, as well – but such a sharp downward movement provides more room for lower borrowing costs more quickly."

Andy Caton, corporate development director of Yorkshire Building Society, added: "Whilst it remains to be seen how money markets may fully react to the cut, it should provide a major boost to general market sentiment."