The Bank of England has voted to reduce interest rates to 4.75 per cent today (November 7).
The bank's Monetary Policy Committee voted eight to one in favour of the cut.
It comes three months after the bank reduced interest rates for the first time since March 2020, cutting them to 5 per cent.
The Monetary Policy Committee said: "There has been continued progress in disinflation, particularly as previous external shocks have abated, although remaining domestic inflationary pressures are resolving more slowly."
It comes as inflation eased, dropping to 1.7 per cent in September, down from 2.2 per cent the previous month.
Lindsay James, investment strategist at Quilter Investors said the decision to cut rates by 0.25 per cent was in line with market expectations.
She added: “With expectations for UK rate cuts now being scaled back, and rates not expected to fall below 4 per cent in 2025, investors would be well advised to lock in borrowing rates where possible. The influence of US monetary policy remains significant, with interest rates likely to stay higher for longer.”
Dean Butler, managing director for retail direct at Standard Life, said the move could bring Autumn positivity for those with housing costs and unsecured debt. Though he warned inflation is still forecast to rise again this winter.
Butler added: "Savers continue to have the opportunity to benefit from a higher interest environment with rates on best-buy instant access cash savings accounts hovering just below 5 per cent and some fixed deals considerably higher.
"It’s a good idea for anyone with savings to shop around as rates vary widely across the market – in addition, while not always worth the switch by themselves, some high street banks are offering extra rewards for switching.
"It’s worth those who have emergency 'rainy day' savings covered considering an investment product like a stocks and shares Isa however investments can lose as well as gain value.
"If you’re able to take a longer-term view, saving into your pension has the potential to outpace inflation over a number of years due to the power of compound investment growth. Pensions are also incredibly tax efficient – last week, the chancellor chose to leave both pensions tax relief and tax free cash rules alone."
Chris Arcari, head of capital markets at Hymans Robertson, said: "Headline inflation came in at a below-target pace of 1.7 per cent year-on-year in September and while still elevated, service sector and wage inflation are coming down more quickly than the BoE anticipated in their previous monetary policy report.
"This opened the door for the BoE to make today’s change and lower interest rates, while still maintaining a relatively restrictive policy stance. The front-loaded nature of the spending and the OBR's forecast impact on near-term growth and inflation has seen the market shift to expect a slower pace of rate cuts from the Bank of England.”
