The move was announced at a press conferences on Bank of England measures to respond to Covid-19. This press conference was also Mark Carney's last as Governor of the Bank of England. He spoke to the press alongside his successor Andrew Bailey.
Little did we know then that Andrew Bailey would then be announcing a further cut to 0.1% on 19 March 2020. This cut came after a vote at a special meeting of the Monetary Policy Committee. The Bank of England also announced it would increase its holdings of UK government and corporate bonds by £200 billion.
As we have seen the Bank of England has been co-ordinating its response to Covid-19 with HM Treasury. The next Monetary Policy Committee is due to take place tomorrow, 26 March 2020. Whilst the rate cuts have been bad news for savers, already struggling with low interest rates, the resounding message is that we all need to get through this together. There is recognition that small companies usually "bear the brunt" of downturns.
The last time we saw the base rate at 0.25% was 4 August 2016. The base rate has been increasing since then. Up to until recently many institutions had action plans prepared in anticipation of implementing a rise. These recent cuts demonstrate that we truly are in unprecedented times.
In the past financial services firms have actively been contacting customers to let them know that payment holidays may be an option for those who suffer financial detriment as a result of coronavirus, whether that be through illness itself or lost working opportunities. Earlier in the month Barclays, Lloyds Banking Group, Natwest, Santander, TSB and Virgin Money announced emergency measures. Depending on the product, some firms will offer relief on a case-by-case basis whilst others will set relief windows of 2-3 months. The idea being that customers struggling to make mortgage, loan and credit repayments will be offered the opportunity to defer payments.
The Financial Conduct Authority (FCA) released specific guidance in relation to mortgages on 20 March 2020. Firms are being advised that they should grant a 3 month payment holiday where a customer expresses that they may experience payment difficulties. There should be no detrimental impact on the customer's credit score as a result.
We hope to see similar guidance in the consumer credit space following meetings between the FCA, Finance & Leasing Association and HM Treasury.
Whilst things have changed a lot of the last 2 weeks, in some ways they have not. Despite the raft of announcements made it takes time for financial services firms to implement solutions. We know and have seen that a lot of firms are working round the clock to do the best for their customers. We will continue to support them in doing this as best we can.