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By Lee Wild

Date: Wednesday 09 Apr 2008

LONDON (ShareCast) - The pound tumbled to a new low versus the euro today as traders bet that the Bank of England will cut interest rates by at least a quarter point at tomorrow’s policy meeting.

The UK currency fell to a worst-ever 80p a euro following another gloomy read on consumer confidence from the Nationwide Building Society.

The monthly survey revealed a drop to 77 in March from 78 the month before as the credit crunch and housing market weakness continued to upset consumers.

“The downturn in consumer confidence over the last six months is not surprising given developments in the financial markets and a weakening housing market,” said Nationwide's chief economist Fionnuala Earley.

“Consumers may begin to feel more comfortable following the expected cut to rates this week, but it is unlikely that confidence levels will increase in the short term,” she added.

Today’s report followed Tuesday’s terrible data on UK house prices from the Halifax, which revealed the biggest monthly fall since September 1992.

Mortgage lenders have been raising rates in recent weeks, especially for those with small deposits. The Alliance & Leicester is expected to bump up the cost of its own popular fixed rate deals on Friday.

The move, which would take A&L’s two year fix to over 6%, will be the second time this week that the lender has made its deals more expensive.

HBOS-owned Halifax, Abbey National and the Nationwide have all raised mortgage costs despite two interest rate cuts by the central bank since last December, and others seem undeterred from following suit even though the base rate is seen dropping further this year.