What the interest rate cut means for you

With a further cut in the Bank of England base rate today bringing interest rates down to the lowest level since the 1950s, both borrowers and savers would be wise to act now and consider changing products to secure a better deal.

A low-interest environment is never good news for beleaguered savers who in recent times have seen the interest on their pot of money hovering just above inflation in most cases, and well under it in some.

Cash Isas continue to offer some of the best rates for cash on deposit, and unlike standard savings accounts, they have the incentive of being exempt from tax. With a ?3,000 limit on Isa investment in any tax year, savers are advised to use this up first, then stash any extra in a standard savings account.

Today's announcement will no doubt see a flurry of banks and building societies hastily cutting their savings rates - and a little while later doing the same to their mortgage rates, which is of course good news for borrowers.

For this reason, savers and borrowers should keep a close eye on rates in the next few days to see if they can get a better deal.

Before today's cut, the best cash Isa rate on offer was 4.35%, although both the institutions offering this (Northern Rock and Portman Building Society), only offer it as a bonus rate for the first few months. For instant access Isas, with a rate that isn't bumped up by a bonus period, Kent Reliance Building Society and Safeway (operated by Abbey National) both offer 4.2%.

Homeowners have cause for celebration again as the fall in interest rates will see their monthly repayments fall.

Some of those with variable rate deals will benefit instantly from the interest rate cut, as their mortgage rates fall in line with the base rate - although it should be remembered that not all lenders will pass on the full rate cut. The lowest rates before today's cut were already below 5%, with the best discounted variable rates barely above 3%.

Borrowers with fixed rate deals would be wise to keep an eye on rates in the coming week and consider remortgaging to a better deal, especially if they haven't done so following previous rate cuts. However, redemption penalties can often be a deterrent to changing home loans. Some of the best deals before today's rate cut on fixed rate deals with no extended tie-in range from 3.29% with West Bromwich Building Society to 3.94% with Britannia.