Interest rate cut to 5.5%

Posted on 6 December 2007 by Charcol

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The Bank of England has decided to reduce interest rates today, taking the Bank rate down by 0.25 percentage points to 5.5%.

The news will be welcomed by borrowers, many of whom are facing the prospect of more expensive mortgage repayments as they come off short-term fixed-rate deals taken out when interest rates were lower.

Several major mortgage lenders have been quick to announce a 0.25-percentage-point reduction in their own mortgage interest rates.

The cut in the central Bank rate is the first since August 2005. The Bank of England has raised interest rates five times since August 2006, principally to keep the rate of inflation under control.

The Bank said that although CPI inflation was higher than its target rate of 2.0%, there were signs that output growth was slowing, and it would therefore be possible to cut the Bank rate now while aiming for 2% inflation "in the medium term".

More detail on the reasons behind the Bank's decision will be revealed when the minutes of the Monetary Policy Committee are published on 19 December.

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