We witnessed yet another interest rate cut by Bank of England in last week which was reduced by 0.5% and is now at 1%. This is the first time in the history of Bank of England that interest rate has been lowered to this level.

The Bank was under the influence of deepening recession and the global reduction in interest rates. Most economists were predicting a 0.5% cut while some of them were even expecting a 1% cut.

The European bank in contrast decided not to cut its interest rate level and it remains at 2%. This decision proved a bit expensive as Euro started to weaken against dollar and pound whereas pound strengthened due to this rate cut.

It is debatable whether the common man’s life would improve with this rate cut or not as recession has far more greater impact on the common man. And also it will affect the common man only if this rate cut is passed to him by the high street banks.

Some banks like Lloyd TSB have showed their determination of passing the benefit to its customers but some banks are showing a resistance in this regard.

The biggest impact of this cut would be on mortgage payments but only those with a tracker mortgage will get the benefit while the others will get nothing out of this. Investors on the other hand are the biggest losers who will get nothing from their investments.

This will allow investors to take their money elsewhere in the world where they could earn higher interest income but as economy is shrinking worldwide and interest rate cuts are witnessed globally, this will not help investors much in finding alternative investment opportunities.