On 8th January the Bank of England reduced the bank lending rate to an extraordinary 1.5%. The bank rate has not been this low since 1694, when our economy was an entirely different model. This was no great surprise; the question was ‘how much’ rather than ‘when’.

Further cuts in the bank rate look inevitable. The City is expecting at least another half point reduction in February and March, which would leave rates at 0.5%, taking us very close to the frightening spectre of a zero bank lending rate.

Anyone with a tracker mortgage will be delighted with the new bank rate. This is a mortgage contract the banks cannot manipulate. Please ensure you fully read your mortgage documents and that your lender passes on all of the reductions it is obliged to. (As if they wouldn’t!)

The banks and building societies still show considerable reluctance to lend funds to homeowners and businesses and to pass on these bank rate reductions. Many of Britain's leading banks seem on a collision course with the government when they said cautiously that they were just keeping their main lending rates "under review".

If the banks cannot be persuaded to increase the flow of credit the Government may to directly intervene and move the banking sector in to public control. This is not as radical as seems as HMG already runs Northern Rock and Bradford & Bingley, has a controlling stake in RBS and owns a large share of Lloyds TSB-HBOS.

The same banks and building societies tell us that they must consider their savers and the rate of return payable on their savings. However, the rates they are offering savers does not reflect their empathetic noises.

So how do you get a return on your savings? Well, as ever, shop around. There are unit trust bonds out there that may pay 5.5% but these are not without some risk. These funds are invested in companies and if any of these companies fail it may affect your capital and return. Not all will fail, though, and there are opportunities developing from the ashes of 2008, which will grow green shoots.

Here is a good alternative. Have a look at your debt list; mortgage, credit cards, car loan etc. The interest rate you are paying on these debts is likely to far exceed any return you are getting on you savings.

So does it not make good sense to utilise your poor return savings to settle your expensive, high interest debts? Your cash balance may be much improved and your debts reduced.

We must remain calm and vigilant during these unprecedented and troubled times. It will get worse before it gets better, but have faith, it really will get better.