"The spread of Covid-19 and the measures being taken to contain the virus will result in an economic shock that could be sharp and large, but should be temporary."
The Monetary Policy Committee held an emergency meeting on 19th March and unanimously voted to cut the rate to a historic low of 0.1%.
Last week, three policy committees at the Bank announced measures to support businesses and households during the economic difficulties associated with Covid-19, but further movement in the stock markets and tightening global financial conditions prompted another emergency meeting of the MPC.
It also announced that the Bank of England will increase its holding of UK government bonds and sterling non-financial investment-grade corporate bonds by £200 billion to a total of £645 billion, financed by the issuance of central bank reserves.
The announcement from the Bank of England notes that: "The spread of Covid-19 and the measures being taken to contain the virus will result in an economic shock that could be sharp and large, but should be temporary. The role of the Bank of England is to help to meet the needs of UK businesses and households in dealing with the associated economic disruption."
Alex Maddox, capital markets director at Kensington Mortgages, commented: "The Bank of England is taking out the big guns. The rate cut is mostly just a signal - trimming another 15bp to 0.10% will have a negligible impact, as rates are already so low.
"What will make a big difference are the two other measures announced by the bank - a massive 45% increase in the Quantitative easing programme to £645bn, and even more money to the funding schemes that can get cash to consumers and small businesses."
Andrew Montlake, managing director of Coreco, added: “This dramatic rate cut by the Bank of England is ultimately a symbolic one but it shows the absolute carnage that Covid-19 is wreaking across the UK and global economy.
“For the Bank of England to cut rates right to the bone highlights the extraordinary times we are living in.
“With UK interest rates now at their lowest level in history, we expect a surge in enquiries about what this means from existing and prospective mortgage borrowers.
“Those on a tracker product will see an immediate benefit, but fixed rates are unlikely to be cut much further.
“Lenders have their own issues to deal with as many of their staff are off or working from home so this is unlikely to translate into cheaper rates across the board.
“We are already seeing some lenders, especially more specialist mortgage providers, increase their rates to protect their positions.
“In the current climate, lenders need to preserve their margins more than ever, if not bolster them further.
“For anyone looking at remortgaging within the next six months, now is categorically the time to get on with it.”
