The base rate was at 2% for most of the 1930s and 1940s and was last at 2% in 1951. The base rate has not been below 2% since the Bank of England was founded in 1694.
Neil Chegwidden, Head of Residential Research at Jones Lang LaSalle comments,
"Quite bizarrely, given the 1.5% base rate cut last month and the various giveaways in last week's Pre-Budget Report, today's base rate cut will still be seen as a much needed boost and comfort to Britain’s beleaguered households and homeowners."
"The rate cut will also be welcomed by the housing industry and will provide yet greater incentive for first-time buyers to step onto the property ladder. The Bank of England's latest move will not solve all our housing woes but it does sow the seed of hope, especially looking towards next year. The magnitude of the cut is an additional boost for the housing market."
UK commercial property
The 1% interest rate cut today reflects the severity of the current economic downturn. GDP growth will stagnate or go backwards throughout next year, even if interest rate cuts and the stimulus package succeed. Chancellor Darling's £20bn fiscal stimulus package announced in the pre-budget report, which includes a 2.5% VAT cut and bringing forward £3bn capital spending on infrastructure, has yet to provide any significant confidence boost.
The economy will contract further next year with occupier and investor demand for commercial property weakening considerably.
Paul Guest, Head of EMEA Research at Jones Lang LaSalle comments, "This interest rate cut was necessary despite the 150 reduction just a month ago. Investor and occupier confidence are crumbling and the wholesale money market continues to be very restricted. Commercial property yields remain under pressure and will move out further next year."
"There is however an important silver lining amid all the doom and gloom – the inflation rate is coming down fast. This will provide the Bank of England with plenty of flexibility to pursue aggressive interest rate cuts. We expect a bounce back in commercial property rents from 2011 onwards as the economy and credit market recovers."
