Borrowers may well be breathing a sigh of relief today after the Bank of England announced that it has cut the base rate of interest from 5.75 per cent to 5.5 per cent.

What seemed somewhat improbable a week ago has now become a reality as the likes of the Financial Services Authority (FSA) and the Council of Mortgage Lenders (CML) made gloomy pronouncements earlier this week, supported by the most recent market data.

However, the early Christmas present should not necessarily be treated as such, according to the Consumer Credit Counselling Service (CCCS).
 
"The drop in interest rates should not be a signal for consumers to overspend at Christmas," said CCCS chairman Malcolm Hurlston.

"Although this is undoubtedly good news for mortgagors coming off a fixed rate mortgage, the cost of any new deal will still be significantly higher than in the past and the public should be ready for this as they renegotiate their mortgages," Mr Hurlston added.

Lenders such as Halifax and Nationwide, however, have already reacted to the news by cutting rates on some of their products by 0.25 per cent.

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