Interest rates fall alongside a £500bn bail-out for UK Banks
This week the Government unveiled a £500bn rescue package for Britain's banks.
The banks included in the package are: Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered.
The £500bn bail out plans consists of:
- £50bn of taxpayers' money being used to buy stakes in major banks to be injected into the banking system immediately
- £200bn being made available to the banking sector for day to day loans in a bid to stabilise the current financial market
- £250bn to guarantee debt for interbank loans
Just hours after Alistair Darling confirmed the rescue package, the Bank of England announced it was reducing interest rates from 5% to 4.5%.
The cut in interest rates will mean a saving of approximately £47 a month on a typical £150,000 mortgage if the reduction is passed on.
Some major banks including Lloyds TSB, Royal Bank of Scotland and Halifax have passed on the rate cut to borrowers with standard variable rates already.
The Government rescue package will extend funding available to banks through a capital for shares scheme and would mean that an average taxpayer will become a £16,500 banking shareholder.
Gordon Brown commented: "Extraordinary times call for bold and far-reaching solutions. This is not a time for conventional thinking, but for fresh and innovative intervention that gets to the heart of the problem."