The Bank of England has cut interest rates by one percentage point, from 3% to 2% – the lowest level in more than half a century.

The move has been welcomed by many commentators who said the cut would help the slowing economy, although others have said it won’t rejuvenate the housing market.

Liam Bailey, head of residential research at Knight Frank said: ‘This cut is unlikely to have any immediate effect on the housing market, although it may tempt some buyers to make a decision. Prices will continue to fall into 2009, and we believe they have a further 15% to fall. However, by limiting the extent to which the economy contracts, and minimising the level of business failure and job losses, the cut will help to prevent a more serious slump from occurring.

‘Much depends on whether the new rate is passed on to borrowers. LIBOR has decreased in recent months but remains highly volatile. Until it stabilises lenders will resist reducing rates or increasing mortgage availability, although pressure from the Financial Services Authority is likely to increase.

‘The housing market remains at a standstill, despite last month’s 1.5% cut. Many homeowners are unable to remortgage, while first-time buyers are finding it almost impossible to provide the high levels of deposit now required by lenders.’