The Bank of England has today made an emergency reduction in interest rates of 0.5%, a day before it was due to announce its decision. Interest rates were cut by 0.5% to 4.5%. Five other central banks acted at the same time, also cutting rates by 50 basis points. The US Federal Reserve cut rates from 2% to 1.5%, the European Central Bank reduced rates from 4.25% to 3.75%, while the central banks of Sweden, Switzerland and Canada took similar action.

This is the first reduction in six months, sparked by fears for the slowing global economy and struggling stock markets. Savills Private Finance (SPF) expects further rate reductions in coming months.

The rate reduction is good news for the buy-to-let sector which has suffered much negative press sentiment in recent days. Lenders have been raising rates in response to unprecedented business levels and the rising cost of borrowing in the money markets. The nationalisation of Bradford and Bingley, taking with it the innovative and competitive buy-to-let lender Mortgage Express, means there is now less choice available.

However, there are still plenty of lenders operating in this market and competitive rates are achievable.

(October 2008)