Tweet
Interest rates have been cut for the first time in over two years by 0.25%, to 5.5%.
The decision by the Bank of England's Monetary Policy Committee will come as relief for consumers and businesses.
Both were facing the possibility of a credit squeeze brought on by the mortgage lending crisis in the US.
Homeowners, recently hit by rising fuel, food and mortgage costs had been hoping the decision would go their way.
A quarter point cut will knock around £16 a month off the cost of a typical £100,000 mortgage.
However, some experts are warning the majority of lenders were unlikely to pass on any cut in full, while others may not reduce their rates at all.
This is because the rate at which banks lend to each other - known as Libor - has soared to 6.6%.
The MPC's first rate cut since August 2005 follows more evidence of a sharp downturn in the housing market and consumer confidence.
The MPC "faced an extraordinarily difficult decision" and one of the toughest in its ten-year history," said the CBI's Ian McCafferty.
"The outlook is particularly uncertain, and the risks of an error are high," he added.
As well as five interest rate rises since August of last year, households are presently faced with petrol costs of £1 a litre or more and rising food bills.
The decision by the Bank of England's Monetary Policy Committee will come as relief for consumers and businesses.
Both were facing the possibility of a credit squeeze brought on by the mortgage lending crisis in the US.
Homeowners, recently hit by rising fuel, food and mortgage costs had been hoping the decision would go their way.
A quarter point cut will knock around £16 a month off the cost of a typical £100,000 mortgage.
However, some experts are warning the majority of lenders were unlikely to pass on any cut in full, while others may not reduce their rates at all.
This is because the rate at which banks lend to each other - known as Libor - has soared to 6.6%.
The MPC's first rate cut since August 2005 follows more evidence of a sharp downturn in the housing market and consumer confidence.
The MPC "faced an extraordinarily difficult decision" and one of the toughest in its ten-year history," said the CBI's Ian McCafferty.
"The outlook is particularly uncertain, and the risks of an error are high," he added.
As well as five interest rate rises since August of last year, households are presently faced with petrol costs of £1 a litre or more and rising food bills.
