Mortgages will be harder to find because of the latest interest rate cut, a building society chief has warned.

The Bank of England’s Monetary Policy Committee reduced the base rate by 0.5 per cent to one per cent, the lowest in the bank’s 316-year history.

The Bank said the cut was due to a tightening in credit conditions faced by companies and households and a weak picture for consumer spending.

But Mike Lazenby, chief executive of Chatham-based Kent Reliance Building Society, denounced the decision, saying it was terrible news for savers, and they outnumbered borrowers by seven to one.

Far from reducing rates, the Bank should have increased them to encourage investment.

He said a rate of around five per cent would be about right for borrowers and savers.

Historically low rates discouraged savers from investing in banks or building societies and there would therefore be less to loan to borrowers.

"It doesn’t make any sense at all," he said.

"The rate cut will do a lot of damage to both savers and borrowers. A lot of savers rely heavily on the interest they receive for their investments and since July 2007 they have seen their interest income drop by about 83 per cent."

Somebody who had been getting £100 a month was now receiving around £13, he said.

"People rely on this money to pay their way and just to survive. Its a very blunt instrument the Bank of England is using and it’s having a really bad effect on savers who are going to have to get used to not having any interest at all."

He said that apart from the safety aspect, it would deter investors from saving anything at all.

"The fact is some people will choose not to put their money in a financial institution because there’s no interest and if they don’t do that there isn’t money in the system to lend.

"Mortgage customers will also suffer the consequences of a very low interest rate."