Bank of England chops 1.5 per cent off interest rate

THE Bank of England has cut interest rates by 1.5 per cent in its most dramatic attempt yet to rescue the economy from recession.

The unexpectedly large cut brings the official rates down to 3 per cent and was immediately welcomed by business leaders.

The cut is the biggest in the UK since a 2 per cent cut in March 1981 - when the country was gripped by recession in the early years of Margaret Thatcher's government.

It brings rates to their lowest level since 1955.

The Bank of England said it made the move because of the "substantial risk" of undershooting its 2 per cent inflation target as a sharp recession looms.

Lloyds TSB was the first to announce it would be passing on the full cut to variable-rate mortgage customers.

The group, which also lends under the Cheltenham & Gloucester brand, is reducing its standard variable mortgage rate (SVR) from 6.5% to 5%, as of November 1.

Other lenders were slower to respond: all of the major groups, including the UK's biggest lender, Halifax said their rates are under review.