Interest rates have been cut by 0.25% to 5% by the Bank of England’s Monetary Policy Committee (MPC).

The MPC voted by a majority of 5 to 4 to lower the bank rate by 0.25%. Four members preferred to maintain the rate at 5%.

This compares to the last meeting when the MPC voted by a majority of seven to two to keep the bank rate on hold. The two members in the minority backed a reduction in rates to 5%.

This is the first BoE interest rate cut since August last year. Before August last year, the BoE made 14 consecutive rate increases.

The monetary policy summary states: “It is now appropriate to reduce slightly the degree of policy restrictiveness. The impact from past external shocks has abated and there has been some progress in moderating risks of persistence in inflation.”

“Although GDP has been stronger than expected, the restrictive stance of monetary policy continues to weigh on activity in the real economy, leading to a looser labour market and bearing down on inflationary pressures.”

Mortgage market participants have long said that a fall in the rate of inflation close to the BoE target rate of 2% would give the bank confidence to cut the base rate.

Inflation held steady at 2% in June, according to the latest figures from the Office for National Statistics.

However, the MPC says it expects inflation to increase to around 2.75% in the second half of this year.

The next MPC meeting is on 19 September.

John Charcol mortgage technical manager Nicholas Mendes says: “Today’s Bank rate reduction announcement is a positive step for the property and mortgage market, marking the first interest rate cut in over four years finally kick-starting the downward bank rate cycle.”

“Positivity spreads quickly and while today’s rate cut would have already been priced in, this will undoubtedly revitalise activity. Mortgage holders nearing the end of their fixed-rate period and prospective buyers can now make informed decisions with greater confidence, rather than delaying and speculating.”

“Overall, this rate reduction is a promising sign for the future, bringing much-needed relief and confidence back to the property and mortgage market. Let’s also take a moment to recall Governor Andrew Bailey’s previous comments suggesting that the Bank could cut rates faster than markets expect, making a total of three rate cuts this year a possibility.”

There’s more industry reaction here.