The Bank of England has finally cut its base rate from 0.5% to 0.25%. It had been predicted for a while, but finally came to fruition in the wake of disappointing economic statistics following the EU referendum result.

It was March 2009 when it was last changed and the consistency of the rate at 0.5% has brought a stability that helped see a lot of people through the recessionary period of the banking crisis and into a fairly prolonged spell of business success since.

What will the impact be for savers and borrowers?

So why did it need to change now and what will the impact be for savers and borrowers? The answer to why is fairly straightforward. The Bank’s Governor was very clear in his message that we are in a period of economic uncertainty following the vote to leave the EU and he sees it as his job to help calm those waves of uncertainty. But will it really help?

It’s going to do nothing for savers of course. Interest rates on money held in cash savings accounts have been at an all-time low since the previous cut in 2009. A reduction of 0.25% is hardly going to change that, unless the banks decide they need you to pay them for looking after your money! It sounds far-fetched, but I wouldn’t put anything past them.

An immediate reduction in the cost of borrowing at base rate

Borrowers should be better off. All of the major banks have followed the lead of the Bank of England and cut their own base rates to 0.25%. If your overdraft or loan is linked to base rate, you should see an immediate reduction in the cost of your borrowing. If you don’t then you shouldn’t be shy in asking why not.

Those borrowing at a fixed rate will see no change. You chose, when taking out your loan, to protect yourself from rate increases, which means you gave up the right to benefit from a reduction.

Will it work? Personally I think it’s a lot of hot air. Of course it’s the right way for the Governor to behave in the circumstances, but the change is so marginal that I don’t believe it can have any significant effect.

There are much greater worries for the UK than a tiny cut in Bank base rate

The continuing decline in the value of the pound, the potential for inflation to rise again, the risk of job cuts if uncertainty remains for too long and the prospect of the UK entering a period of prolonged recession are all greater worries for us than a tiny cut in Bank base rate.