Bank of England cuts rates after slowdown in inflation(Image: UCG/Universal Images Group via Getty Images)

BREAKING: Bank of England cuts interest rates from 4% to 3.75% in early Christmas present

by · The Mirror

The Bank of England has handed borrowers an early Christmas present by cutting interest rates to the lowest level since February 2023.

Its nine member Monetary Policy Committee voted 5 to 4 to reduce its base from from 4% to 3.75%, and marked the sixth cut in interest rates from August last year. The drop was widely expected after a welcome slowdown in inflation and pay growth.

The cut will deliver a boost to borrowers with variable rate mortgages, and is also expected to drive fixed rate mortgage costs lower for taking out a new loan or remortages. However, it threatens to prove a setback for savers if banks and others lower what they pay depositors.

The move comes after inflation fell to an eight-month low of 3.2% in November, the Office for National Statistics (ONS) said this week. This was largely driven by food and drink inflation which dropped to 4.2% from 4.9%, while alcohol and tobacco prices also eased.

Bank of England lowers borrowing costs to near three year low( Image: Getty Images)

Marylen Edwards, director of mortgages at specialist lender MT Finance, says: “Today’s decision by the MPC to cut rates will be welcomed by borrowers. After interest rates were cut by the US Federal Reserve last week, it seemed inevitable that the Bank of England would follow suit, particularly after inflation fell in November. We are hopeful that this move will instil some confidence into the market, and we will start to see more landlords, as well as owner-occupiers, transact in the New Year.”

Savers threaten to be worse off after Bank of England rate cut( Image: Getty)

The Bank of England's base rate reached 5.25% in 2023, but five cuts since August 2024 have brought it down to 4%. The rate was then held at meetings in September and November.