The rate-setting Monetary Policy Committee voted in a 5-4 split in favour of cutting the rate, which affects a wide range of consumer loan agreements from credit card to mortgage payments.

Andrew Bailey, Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor voted in favour to reduce the interest rate.

The bank rate was held at 4% in September and November after being cut from 4.25% to 4% in the August meeting.

Yesterday, the Office for National Statistics revealed that inflation fell more than expected to 3.2% in November from 3.6% the month prior. 

In the MPC summary today, it states: “Although above the 2% target, it is now expected to fall back towards target more quickly in the near term.”

“Reflecting restrictive monetary policy, and consistent with evidence of subdued economic growth and building slack in the labour market, pay growth and services price inflation have continued to ease.”

“Monetary policy is being set to ensure CPI inflation settles sustainably at 2% in the medium term, which involves balancing the risks around achieving this.”

“The risk from greater inflation persistence has become somewhat less pronounced since the previous meeting, while the risk to medium-term inflation from weaker demand remains.”

“The extent of further easing in monetary policy will depend on the evolution of the outlook for inflation. The restrictiveness of policy has fallen as Bank Rate has been reduced by 150 basis points since August 2024.”

“On the basis of the current evidence, Bank Rate is likely to continue on a gradual downward path. But judgements around further policy easing will become a closer call.”

Commenting on today’s decision, Chetwood Bank chief executive Paul Noble says: “Despite the clamour for another cut in recent months, today’s result was still not a foregone conclusion. If yesterday’s inflation figures had been different, today’s decision might not have gone through, especially given the environment of unreliable growth and shaky confidence.”

Also commenting, Market Financial Solutions chief executive Paresh Raja adds: “This is what so many were hoping for – the Bank of England has sent a clear signal that it wants to reduce the cost of borrowing, and we expect the property market to respond quickly.”

“Much of October and November’s stalled activity ahead of the Autumn Budget is already now flowing through, and today’s cut will undoubtedly add further momentum.”

“Yes, the market will slow over the festive period, but once we’re into the new year, we should expect to see greater confidence and demand among property investors and homebuyers. So, lenders must be ready to support brokers and borrowers as activity accelerates. In doing so, we can lay the foundations for a robust and growing property market in 2026.”