The Bank of England has cut interest rates to 5% amid growing concern over the global economy.

Falling house prices and a dip in consumer confidence are thought to have led to the move.

On Tuesday, the Halifax, Britain’s largest mortgage lender, posted an average 2.5% fall in house prices since February, the largest monthly drop since the crash in the 1990s.

Reacting to the rate cut, Neil Chegwidden, head of residential research at Jones Lang LaSalle, said: ‘Although the decision to cut by a quarter point will probably feel like quite a bold move by the MPC, we do not believe that it will make much, if any, difference to UK homeowners in the short-term.

‘Looking forward, today’s base rate cut is unlikely to halt this steady decline in average UK house prices or the deterioration in household finances and confidence. We believe that it will take further and stronger action by the MPC before homeowners and consumers get even a whiff of a return to any feel good factor in the coming months.'

Muted effect

Atisreal's head of research Keith Steventon added: 'The decision by the MPC to cut interest rates recognises the severity of the economic slowdown we face. Unfortunately its effect is going to be muted. There will be little benefit for borrowers. The restrictions being placed by mortgage lenders has little to do with base rate and more to do with the loss of liquidity in the financial markets and the perceived risk of 100% and related mortgages. Nor will it help the commercial property market. So far as the investment market is concerned we need buyers to feel confidant that the floor has been reached or even passed and that the only way is up. We then need sellers to accept that prices are where they are.

'On top of all this, interest rate cuts are a crude tool to use. They are imprecise in their effect and take 18 months to more to show any significant effect.'