Dear listener,

If you don’t like lots of statistics it’s probably best to skip to the asterisks, Because I am going to take this chance to tell you things you never knew about interest rates. But which I analysed during bouts of insomnia and just have to tell someone.

This week’s cut of 1.5% in the Official Bank Rate is not – quite – unprecedented. It has happened four times before – in 1854 and 1844 and twice in 1695. In fact May 1695 was the only other occasion when the rate fell from 4.5% to 3%. And that was less than a year after the Bank of England was founded on 27 July 1694.

The last time the rate was snipped by 1.5% or more was on 11 March 1981 when they fell by 2%. So this is the biggest since then. The biggest ever reduction (so far) was 4% on 6 August 1914. And it came just a week after the biggest rise – also 4% – which was on 31 July 1914. Such vacillating is forgivable because World War I had just begun. 

As for the new rate of 3%, that is not the lowest rates have ever been. They have been as low as 2% on nineteen occasions in the Bank’s history. Most recently they were fixed there in 1939 – a rate which lasted through World War II until 8 November 1951. A rare 12 years of stability. Though the granddaddy of all stable periods was 15 April 1719 to 15 June 1822 (yes more than a century) when the rate stayed at 5%.

The base rate peaked at 17% from 15 November 1979 to 3 July 1980. And they stayed in double digits – with brief dips into the nines and the odd high eight – for 13 years from 8 June 1978 to 4 September 1991. Typically though the Bank Rate has been 5% over the last 314 years and changes to the rate – of which there have been 823 – have typically been 0.5%. And because I know you are desperate to know, most rate decisions – 70% – have been made on a Thursday. And Thursday’s child certainly has far to go.

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And so have I. So let me tell you that we will be doing a lot about this not unprecedented but nevertheless unexpectedly large cut in rates. Will banks pass it on to people with mortgages and other borrowers? If so is that bad news for savers, especially the hundreds of thousands of people who rely on the income from their savings? What does the rate change mean for the economy? And inflation? All this and more we will examine in our inimitable way.

The Financial Services Authority is to take over the regulation of the banks. You may have thought it regulated them already. And indeed it does. But not most of their retail banking activities, including current accounts, overdrafts, savings accounts, and all that money transmission stuff like direct debits and the famous clearing cycle. But from 1 November 2009 that will change. And the banks will be subject to the FSA’s rules on treating customers fairly and making sure communications are true, fair and not misleading.

Falling prices for shares and property could mean lower inheritance tax bills. But what happens when probate is still being obtained and the price now is well below the price when they were valued? Answers on the programme.

And finally Icesave customers are getting their money back with slightly less than glacial slowness. They should all have had an e-mail warning them that another e-mail was on its way with money to follow later. Details on…

…Money Box – Saturday at noon, repeated Sunday at nine. You can listen to all the items on any programme through our website. And all Money Box programmes are available on a podcast you can download or subscribe to. And if you want to read what was said, we publish a transcript by Monday or Tuesday which is available forever.

Best wishes,

Paul

PS Don’t forget the programme taster on BBC Breakfast between quarter to nine and nine o’clock. If you miss it, you can watch it on the web until Wednesday after which it will be replaced by Samantha Washington’s midweek money headlines.

e-mail Paul Lewis