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Clare Francis: The Bank of England has slashed interest rates for the third consecutive month taking Bank rate to 2% - its lowest level for 57 years.
Interest rates have fallen from 5% since October as the Government and the Monetary Policy Committee desperately try and kick-start the ailing economy. With the country already in recession and many economists warning that we could be heading for a full-scale and prolonged depression, it hoped is that aggressive interest rate cuts will encourage consumers to start spending again.
Rocketing household bills and rising borrowing costs as a result from the credit crunch mean that millions of households are struggling to make ends meet. These factors, coupled with increased job losses and falling house prices has seen consumers rein in spending significantly. And you only have to look at the high street to see the impact this is having on the wider economy - with Christmas only weeks away it should be a boom time for retailers but everywhere you look you can find discounted prices and pre-Christmas sales.
However, because of the recent interest rate cuts, those with variable rate mortgages will be feeling significantly better off than they were a few months ago. Someone with a £150,000 [25-year repayment] tracker mortgage will have seen their monthly payments fall from £877 to £636, leaving them £241 a month better off. The Government hopes that these borrowers will spend this money, which in turn will help revive the economy. But will this strategy work and bring us out of recession quickly? Some question whether it will.
Martin Rutland: if people see rainy days ahead they do start to put more away and you know interest rates have been as low as this historically. They have been higher, but people's mindset when they see people becoming unemployed, they want to build in that buffer in their savings and I think this will be the case this time.
CF: But interest rate cuts are obviously bad news for savers, as savings rates will also plummet. The full impact of this month's rate cut is unlikely to be seen until the beginning of January, but rates will inevitably fall making it crucial that savers ensure they are getting the best returns possible.
Kevin Mountford: I think what it is proving at the moment is, it's more important now more then ever that you spend some time and have a look at whether you are getting value for money. Inflation is coming down, but let's not get complacent - as I say there is quite a gap between the best paying and, I guess, the average, and I think you - the saver - owes it to yourself to ensure you are getting a good deal.
CF: And while the recent rate reductions have been good news for those who already have a variable rate mortgage, life remains difficult for those needing a new home loan now.
Louise Cuming: Well, we're now in unchartered territories; rates are so low that's it's beginning to be a real issue for lenders in order to make profit, and we've already seen some movements where, although they are reducing their standard variable rates, they're not allowing new borrowers to borrow at these lower rates.
So there's no doubt that this will be good news for existing borrowers, who will immediately see rates going down. For new borrowers it will take longer to really see what the effect is - however what I would say is already we're starting to see some competitive rates come out, and what you really do need to do is shop around and if you see a rate that suits you and seems good value, take advantage of it straight away because the good deals are disappearing.
CF: So even though interest rates have plummeted there is no guarantee that the Bank of England's strategy will pull us out of recession quickly. There could be further rate cuts to come and some economists are forecasting that bank rate could fall to 0%, so consumers - both savers and borrowers - need to be prepared for the implications and adapt their finances accordingly.
