Bank cuts rates to 5.5%

The Bank of England has announced that it has cut interest rates for the first time since 0.25 per cent as it looks to boost the economy ahead of the Christmas rush.

The move seemed unlikely just a few days ago but recent market data, as well as a rise in interbank lending rates, seems to have forced the Monetary Policy Committee's (MPC's) hand.

The first cut since August 2005 has been welcomed by both industry and consumer groups, though some have still urged caution during the most expensive time of year.

"The drop in interest rates should not be a signal for consumers to overspend at Christmas," said Malcolm Hurlston, chairman of the Consumer Credit Counselling Service.

"Although this is undoubtedly good news for mortgagors coming off a fixed rate mortgage, the cost of any new deal will still be significantly higher than in the past and the public should be ready for this as they renegotiate their mortgages," Mr Hurlston added.

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