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Interest cut offers little help to borrowers or savers

“But the decision is also bad news for mortgage borrowers. Although the cut will benefit borrowers with tracker or variable rate mortgages, research by BSA has found that concern over getting a mortgage or getting a large enough mortgage is a much greater worry than affording mortgage repayments.

“Against such a background, (today’s) decision means that people are less likely to save and the flow of funds into the mortgage market will be further disrupted.”

The Council of Mortgage Lenders took a similar view and said the rate cut was unlikely to have a material effect on the overall state of the mortgage market.

CML director general Michael Coogan said: "While borrowers on tracker rates will welcome the rate cut, it is doubtful whether it will create the conditions to achieve significantly more new lending.

"It will not be a surprise if banks and building societies try to prioritise savers in this very low interest rate environment. For borrowers who remain in employment, affordability is unlikely to be an issue at the moment.

"But, if the rate cut helps businesses, and therefore helps to keep people employed, this will at least help to cushion the impact of the recession on the housing and mortgage markets.

"In practice, rate cuts alone will not achieve this objective as they have become a more blunt instrument – they are only one of the tools being used to try to help the UK weather the recession."

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