High street banks are being urged to pass on the benefits of today’s 1.5% cut in interest rates to their customers, and not use the availability of cheaper finance to bolster their balance sheets.

The surprise cut in base rates was announced by the Bank of England at midday on Thursday (6 November). It is the biggest single cut since 1981 and takes rates down to just 3% – their lowest level since 1955.

In its statement, the Bank’s monetary policy committee said there was “a very marked deterioration in the outlook for economic activity”.

The cut was therefore justified, to keep inflation up to its 2% target.

It is also intended to stimulate the UK economy as it heads into recession, by discouraging saving and encouraging consumer spending.

The danger, however, is that the banks will not pass this cut on in the form of cheaper borrowing and lower overdraft charges.

The NFU said this was a concern, especially as the level of debt in the farming sector now stands at a record £11bn.

“Given the cost of borrowing for all small businesses, and the sustained high cost of inputs, it is essential that this decision translates into rate cuts by banks in order to help stave off the threat of a sustained period of economic recession,” said an NFU statement.

British Retail Consortium director general Stephen Robertson agreed. “A cut of this scale puts the banks under more pressure to pass the benefits on to borrowers. Base rate reductions can’t achieve much if they don’t help household finances.”

Andrew Shirley, head of rural property research at Knight Frank, said the cut would take some time to affect the farmland market which he described as being “in a state of virtual paralysis”.

“My gut feeling is that it’s the wrong time of year for it to have an immediate impact,” he said.

“The farmland market tends to be slower anyway in the run up to Christmas and it will take some time before the drop is passed on to many borrowers in the form of lower mortgage and other bank lending rates.”