Home loans are cheapest since 1950s

The cost of home loans in Britain fell to their lowest level since the 1950s yesterday when the Bank of England reacted to the growing threat of a global recession by cutting interest rates for the sixth time this year.

Announcing that rates would be trimmed by a quarter-point to 4.5%, the Bank warned that the gloomier world outlook and extra uncertainty had hit both consumer and business confidence, threatening to hold back both investment and consumer spending.

The decision triggered cuts in mortgage rates from all the leading lenders, with a saving of around £12.50 a month from a typical £60,000 interest-only loan and around £20 a month lopped off a £100,000 mortgage.

The Halifax, Britain's biggest lender, said its rates were at their lowest since 1959, while the Nationwide, the biggest building society, said borrowing was at its cheapest since 1955.

City analysts said that further reductions were likely over the coming months. Although the Bank's nine-strong monetary policy committee has brought rates down from 6% at the start of the year, economists believe that the worsening international economic outlook will lead to 4% base rates by early next year.

Both industry and unions welcomed the move, which followed a similar-sized cut by the Bank at an emergency meeting two weeks ago.

However, there was some disappointment that the monetary policy committee had failed to match the half- point cut in rates announced by the US Federal Reserve on Tuesday.

Ian Fletcher, chief economist at the British Chambers of Commerce, said: "A quarter per cent cut represents more of a gentle nudge to the econ omy than the decisive push that business was seeking."

TUC general secretary John Monks said: "Today's decision is very welcome but the Bank must be ready to act again."