Lenders have already indicated that they will not pass on the rate cut. So, further reductions in the base rate are unlikely to benefit mortgage borrowers. Additionally, credit card rates are around 10 times higher than the base rate. Meanwhile, savers have been penalised by low rates, with savings accounts paying around 1.5% on average.
David Kuo, financial expert at Fool.co.uk, said: "In theory we should be delighted to see interest rates fall to historic lows. But the harsh reality is that banks are both unwilling and unable to cut the cost of borrowing further if they are to remain viable.
"It is about time the Government admits that Plan A, namely cutting interest rates alone, is not the solution. In fact, the Monetary Policy Committee is rapidly running out of interest-rate ammunition, and whether interest rates now fall to zero is irrelevant.
"It is imperative that Plan B be implemented without delay. This means reducing the tax burden to replenish the finances of cash-strapped consumers. Cutting taxes will have a more direct and immediate effect on household budgets.
"The Government must recognise that relying on rate cuts alone is like trying to play a round of golf with just one club. It's fine if you can get your first shot on the green, but right now the ball is firmly stuck in the bunker."
