UK interest rates have been cut to 5% from 5.25% by the Bank of England in an attempt to spur the economy in the face of the global credit crunch.

It is the central bank's third cut in interest rates since early December.

The Bank said that disruption in financial markets and tighter credit conditions could lead to a slowdown in the wider economy.

The largest mortgage lenders say they will pass on the cut to their mortgage customers who pay variable rates.

Decision welcomed

Business groups welcomed the decision and called for further cuts to shore up growth.

"It is vitally important to ensure that problems in the financial sector and in the housing market do not damage wealth-creating businesses," said David Kern, economic adviser to the British Chambers of Commerce.

"Undue delay in acting threatens to reduce the effectiveness of interest rate cuts that the MPC itself has anticipated already."

The cut had been widely forecast by economists.

"So far the Bank's gradual approach to cutting rates has been the right one," said Martin Temple, chairman of the EEF manufacturers' group.

"But, given how quickly the situation is changing, there are now greater risks to business and consumer confidence."

Mortgage rates

The UK's biggest mortgage lenders responded quickly, saying they would cut their standard variable mortgage rates by the full quarter of a percentage point.

Their mortgage rates which track the Bank of England's base rate will be cut automatically also.

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