The Bank of England has lowered interest rates to 5% from 5.25%, marking the first cut in more than four years.Rates were last cut at the onset of the coronavirus pandemic in March 2020.
Interest rates dictate the cost of borrowing set by High Street banks and money lenders for the likes of mortgages and credit cards.
They have climbed over the last few years, putting pressure on household finances, although returns on savings have improved.
The fall to 5% means that some homeowners not on fixed-rate deals will see a drop in their monthly mortgage payments. Savers face getting a lower rate of return.However, people with mortgage terms coming to an end will still face higher costs when searching for a new deal.
The decision by the Bank’s nine-member committee was finely balanced – five, including governor Andrew Bailey, voted for a quarter point cut.The Bank’s chief economist Huw Pill was in the minority of four who voted to hold interest rates.
Commenting on the decision, Mr Bailey said: “Inflationary pressures have eased enough that we’ve been able to cut interest rates today.”
