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The Bank of England has today reduced its base rate from 5% to 4.75%.
The Bank's nine-person Monetary Policy Committee (MPC) voted 8-1 in favour of cutting the rate by 0.25 percentage points.
Read on to find out what the rate cut means for you, whether you're buying a home, are due to remortgage, or trying to get the best return on your savings.
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For a second time this year, the base rate has been reduced by 0.25 percentage points, bringing it down to 4.75% with immediate effect.
The cut had been expected, following inflation dropping to 1.7% in September, the lowest rate recorded since 2021.
In its report, the MPC said that there had been 'continued progress in disinflation' but that the 'remaining domestic inflationary pressures were resolving more slowly'.
If you're due to remortgage at the end of a fixed-term, today's cut probably won't make a big difference to the rate you'll get.
Data from Moneyfacts shows average two and five-year mortgage rates have been rising slightly since last week's Autumn Budget.
While the cut could see some lenders reduce rates, analysts expect it to have little impact on fixed-rate mortgages in the short term.
If you're on a variable rate mortgage, however, your rate should fall. Trackers, which are linked to the base rate, will drop by 0.25 percentage points.
Standard variable rate (SVR) mortgages and discount mortgages will fall if individual lenders reduce their SVRs in response to the announcement.
The MPC has adopted a cautious approach to reducing the base rate, while keeping a close watch on the risk of inflation rising.
Experts expect the base rate to fall further over the next year, but don't anticipate that it will return to the very low levels recorded over the last decade.
The Office for Budget Responsibility (OBR) forecasts that the base rate will average 3.9% in 2025 and 2026.
Capital Economics has similar predictions, forecasting that the rate will settle at 4% at the end of next year.
It's been a frustrating year for people looking to move home, with the high cost of borrowing having a big impact on affordability.
Today's announcement should be good news in the long run for first-time buyers and home movers, as it shows a clear direction of travel for the base rate in the medium term.
However, it now appears unlikely the base rate will be cut again after next month's MPC meeting.
In its report, the MPC said 'monetary policy would need to continue to remain restrictive until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further'.
The base rate cut will likely result in banks reducing the amount of interest they offer on savings accounts, providing a blow to people looking for the best return on their money.
Excluding accounts with limited withdrawals or other restrictions, the best instant-access savings rate is currently 5%.
If you're willing to tie up your savings for two years, the best rate currently available is 4.6%.
The top one-year cash Isas offer rates just below 4.5%.
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