LONDON - THE Bank of England cut its base interest rate a full percentage point to 2 per cent on Thursday, a month after chopping it by 1.5 points, to cushion the impact of a domestic recession.

The rate is now at its lowest since 1951 and many economists are predicting it will fall further in coming months. It has never been below 2 per cent since 1694, when the central bank was founded.

Bad economic news mounted just hours ahead of the central bank's monthly rate-setting announcement with the country's biggest mortgage lender reporting that house prices in Britain fell at their fastest monthly rate in 16 years during November and a car industry update showing that new car sales fell 37 per cent from a year earlier.

The British pound fell to an all-time low against the euro and its weakest in more than six years against the U.S. dollar ahead of the announcement as traders hedged against the possibility of a bigger cut.

CBI deputy director-general John Cridland said he believed the bank will have to reduce rates to 1.5 per cent during the winter.

'What is critical for business and consumers alike is that the reductions are passed on,' he said.

Halifax, which is part of the HBOS PLC banking group, said Thursday that house prices plunged by 2.6 per cent in November from the previous month, following on from a 2.4 per cent decline in October.

November's decline - the 10th in a row - was the biggest since September 1992 when house prices fell a monthly 3.0 per cent during the middle of the last housing crash in Britain.

The Society of Motor Manufacturers and Traders said that new car sales fell 37 per cent in November compared to the same month in 2007, with total sales hovering just above 100,000, another sign the automotive sector is being hit hard by the financial crisis.

The group said sales to the private market were off 45 per cent.

For the year to date, total sales were down 10.7 per cent compared to last year.

Official interest rates were at 5.5 per cent at the start of the year, and were still at 5 per cent as recently as October as the bank concentrated on trying to curb an accelerating rate of inflation, a concern which faded rapidly as the economy soured. -- AP