The Bank of England’s Monetary Policy Committee today cuts rates by a quarter of one per cent to 5 per cent, a further attempt to reduce the impact of the global credit crisis hitting Britain.

It’s the third cut since December, earlier this week it was shown that house prices had fallen by 2.5% in a month, the worse drop since 1992.

A mortgage of £100,000 will fall by £17 a month if lenders pass on the cuts in full. Borrowers who are not on a tracker mortgage may not see a benefit as the rates that banks borrow from each other (Libor) doesn’t always follow the Bank of England’s rates.

But, Halifax, Nationwide and Barclays’ mortgage arm the Woolwich all said they would be reducing their standard variable mortgage rates by the full 0.25 per cent within minutes of the Bank of England’s Monetary Policy Committee’s announcement.

Lloyds TSB, that also offers mortgages under the Cheltenham Gloucester brand, and First Direct are also cutting their standard variable rate by 0.25 per cent.

But, many mortgage holders have been unable to secure existing rates when their current deals come to an end.

In a statement, the Bank of England said: “On the upside, above-target inflation this year could raise inflation expectations so that, in the absence of some margin of spare capacity, inflation would remain above the target.

“On the downside, the disruption in financial markets could lead to a slowdown in the economy that was sufficiently sharp to pull inflation below the target.”

The Bank added: “Credit conditions have tightened and the availability of credit appears to be worsening. While the recent depreciation in sterling will support net exports, the prospects for output growth abroad have deteriorated.

“In the UK, business surveys suggest that growth has begun to moderate and that a margin of spare capacity will emerge during this year. This should help to keep domestic inflationary pressures in check in the medium term.”

David Kern, economic adviser to the British Chambers of Commerce told the BBC: “It is vitally important to ensure that problems in the financial sector and in the housing market do not damage wealth-creating businesses. Undue delay in acting threatens to reduce the effectiveness of interest rate cuts that the MPC itself has anticipated already.”