Adam Durbin
Live reporter

The Bank of England's narrow decision to reduce interest rates to the lowest level in two years will have a significant impact on many people, as this rate influences the amount banks will charge for mortgages and other loans.

The nine-member Monetary Policy Committee made the decision amid competing concerns for the health of the British economy. On one hand, economic growth is slow and cuts to interests rates could possibly help this, given it would mean individuals and businesses may have more money to spend.

But there are many worried about rising inflation - the increase in overall prices - remaining above the target of 2%. Food prices in particular are rising and causing some to worry inflation will worsen over the course of the year, forcing the Bank to pause cuts or even raise rates again

Bank of England governor Andrew Bailey has suggested he expects these rises to be temporary and the overall trend for interest rates is down. But he has also acknowledged there is a lot of uncertainty in the UK economy - so the decision to lower rates is a "finely balanced" one.

The government - and Chancellor Rachel Reeves - have welcomed the move and suggested its policies have brought stability to the economy. But the Conservatives say Labour's tax and borrowing policies have meant interest rates have come down slower than they needed to.

We'll be ending our coverage of the UK's interest rates cuts here, thanks for joining us.

Rising prices have left many people struggling to pay their bills and in debt. Here are some tips for what you can do if you find yourself in difficulty:

Talk to someone. You’re not alone and there is help available. A trained debt adviser can talk you through the options.

Take control. Citizens Advice suggest you work out how much you owe, who to, which debts are the most urgent and how much you need to pay each month.

Ask for a payment plan. Energy suppliers, for example, must give you a chance to clear your debt before taking action to recover the money.

Check you’re getting the right money. Use the independent MoneyHelper website or benefits calculators run by Policy in Practice and charities Turn2us and Entitledto.

Ask for breathing space. If you’re receiving debt advice in England and Wales you can apply for a break to shield you from further interest and charges for up to 60 days.

• Tackling it together: More tips to help you manage debt

Michael Race
Business and economics reporter

In short - it means you won't get as big a return on your savings.

Interest rates are used as a tool to combat inflation. The theory behind raising them is to somewhat encourage people to spend less - it's why borrowing becomes more expensive.

But higher rates also means savings rates increase.

Savings rates have been trending downwards for some time given the past cuts in interests rates by the Bank of England. According to financial information company Moneyfacts, average savings rates on an easy access ISA are 2.9%.

Mark Hicks, head of active savings at Hargreaves Lansdown, suggests people should check what rates they are getting.

He says because further rate cuts could come down the line the future, fixed deals on savings accounts are worth considering, so people can secure "today's strong rates".

There’s been a lot of chatter on savings in recent months. The chancellor shelved any immediate plans to make changes to cash ISAs , which allow savers to put away up to £20,000 a year tax free.

Rachel Reeves was thought to be considering reducing the allowance for tax-free cash savings, in a bid to encourage people to put money into stocks and shares instead and boost the economy.

But it was met with strong opposition from banks, building societies and consumer campaigners.

We're hearing more now from Bank of England governor Andrew Bailey, who has been speaking to our economics editor Faisal Islam.

"The world is an uncertain place at the moment," Bailey says, which "impacts on peoples feelings and attitudes, and how they respond towards saving and spending".

But when saving goes up, consumption is not as high as it would have been, he says.

Businesses are waiting to make major investment decisions, Bailey adds, which "has an affect on the path of growth".

The BBC's economics editor Faisal Islam has been speaking to Bank of England governor Andrew Bailey.

Asked if interest rates will continue to fall, as Bailey said earlier, the governor says: “I think the path is downwards... I think the course is a bit more uncertain frankly.

"What do I mean by that? The timing, whether we’ll be cutting at this meeting or that meeting, and I think you see that in markets, I think markets are also reflecting in their pricing the fact that there is genuine uncertainty and that reflects the fact that it is a finely balanced decision so I think that probably for the moment that’s the right place to be.”

He confirms that inflation was being pushed upwards by a number of one-off factors such as food prices and regulated prices such as water bills, which the Bank thinks are likely to be temporary.

Weakness in the labour market and a "subdued" outlook for economic growth helped to persuade the committee to cut rates, he adds.

Jonathan Haskell, who used to be on the Bank of England's Monetary Policy Committee until last August, says the "economy is on a knife edge".

Speaking to BBC Radio 4's World At One, Haskell says inflation is high, while activity remains low, and the Bank is trying to "get the balance" between them.

He says this makes it understandable that the Bank was split on the decision, which saw them take a second vote.

The Bank has got to look forward to what they expect inflation to be but this is "very, very hard" because current high inflation feeds through to future high inflation, Haskell explains.

He says the message from this reduction is that there will be "fewer cuts over the next few months than people think".

Rachel Clun
Business reporter

While inflation reaching 4% in coming weeks will not be welcome news to many households and businesses, one group of people could benefit - pensioners.

Each year, the state pension is increased based on whichever is higher - 2.5%, the average rate of wage growth, or the rate of inflation.

That rate of inflation is taken from the 12 months to September, which is when the Bank of England expects inflation to reach its latest peak.

Laith Khalaf, head of investment analysis at AJ Bell, says "pensioners have something to cheer" in the new Bank of England forecasts.

"It's possible that wage growth may trump inflation, and pensioners get an even bigger bump in their income. But if the Bank of England is right about inflation, then pensioners can look forward to a rise of at least 4% in their state pension next year," he adds.

That's it for your questions, so while our experts step away for a quick cuppa, here's a roundup of what they answered:

• Mortgages were on the mind - we addressed how today's interest rate cuts might affect those in the midst of getting a mortgage
• Though some might be eligible for a new, lower mortgage rate, many banks have likely "priced in" today's cuts to deals already, our business reporter writes
• There was also information for those on fixed-rate mortgages, with the expectation that rates could continue to fall in the future, albeit cautiously and gradually
• One reader also asked just how much of an impact global trade had on today's decision - our reporter says it likely played on the committee's minds
• And finally, we took a look at whether further interest rate cuts might come this year - our reporter says its doubtful this will happen in September, but later in the year might be more likely

Michael Race
Business and economics reporter

I have a mortgage offer from Barclays for 4.39% as a first time buyer and we are currently in the solicitor process stage. If the Bank of England announces rate cuts, how likely will Barclays reduce my mortgage rate? I believe I can get lower rates until my contract exchange takes place. Amey K, Coventry

Hi Amey. Because the Bank of England was widely expected to cut rates today, many lenders will have "priced in" a cut to their current offers.

However, it is probably worth reaching out to your lender or mortgage adviser to see if there is a cheaper rate available because, as you say, you've not signed the contract yet.

Peter Ruddick
Business reporter

Steve in Pembrokshire is interested in the rationale behind today's decision, questioning how certain members of the Bank of England's Monetary Policy Committee can be that external trading forces are not going to push inflation even higher. He asks: Which would be less damaging in the long term - reduce rates now only to have to raise them again later, which could have a severe negative shock on the markets? Or keep them where they are for slightly longer, until the global and national picture is clearer?

I think these are exactly the sort of discussions the nine people on the Bank's decision-making committee will have had in the past few days and weeks Steve.

The Bank’s job is to “maintain price stability”. That means making sure price increases aren’t out of control.

“Low and stable” is what they’re after. They do - though - have a secondary job to support the economic policy of the government, “including its objectives for growth and employment”.

That’s sometimes a difficult balancing act.

Not cutting rates today might have been too big a surprise for the markets, and the Bank would say 4% is still a 'restrictive' rate. But the uncertainty you mention could well be important for future decisions.

Michael Race
Business and economics reporter

A lot of chat about mortgages, but given only a third of people have one, how is the impact of today's decision felt elsewhere?

The other two-thirds of people will be made up of people who have either paid off their mortgage or never had one in the first place, and people who rent.

For private renters, costs have soared in recent years. The monthly cost of renting a home in the UK has risen by £221 in the past three years, according to property portal Zoopla.

Those costs have gone up in part due to higher mortgage rates hitting landlords.

The drop in interest rates over time might lead to some of these increases easing, but that isn’t like to happen immediately, and likely depends on several other factors, including where you live.

Peter Ruddick
Business reporter

Sharat in Nottingham asks: I'm a buy-to-let landlord currently in the process of renewing my mortgage and considering taking some equity out. I'm trying to decide between a two-year or five-year fixed-rate deal, so today’s news on interest rates is particularly important for me. Any insights you can provide on the outlook for mortgage rates or how the market is expected to move?

We all want to know the answer to this one Sharat!

We will dig through the details of this decision for clues but what we know for sure is that the Bank still thinks the future direction is downwards.

They expect rates to head lower, albeit cautiously and gradually.

There is also this line in the Bank of England's statement today, "monetary policy is not on a pre-set path".

What that means is that the Bank will follow the facts and, if the facts change, the direction for interest rates could change too.

Michael Race
Business and economics reporter

Remy asks 1. As a result of this decision, how has the Bank of England’s inflation forecast changed?

2. Are there any expectations for further rate cuts within this year?

3. How did financial markets react to the rate cut?

Thanks for the questions Remy, I'll take each one in turn.

1. Yes, the Bank of England has changed its inflation forecast. It now expects inflation, which is the rate prices rise at, to peak at 4% in September. That is twice the Bank's target rate and above the 3.8% rate previously estimated.

2. The Bank has come out again today saying it thinks rates are on a "gradual" downward path. But with inflation predictions going up, it has raised doubts over when rates will be cut again. Markets appear to not be predicting a further rate cut at the next meeting in September, but think the chances are better for November and December.

3. The FTSE 100, the UK's main stock exchange, fell slightly after the initial announcement, but has remained broadly flat.

Peter Ruddick
Business reporter

Jan in Shropshire asks: We are about to exchange contracts for a house we are purchasing. We haven’t made any mortgage payments yet. Would the interest rate reduction affect us or is it too late as the payment calculations have already been done?

As chance would have it Jan, I am in exactly the same situation as you. We are hoping to exchange contracts on Friday.

I am afraid the answer is that today's cut in the Bank's Base Rate is what we call "priced in".

That means that it was largely baked in to the rates on offer to borrowers at the moment. If you are taking out a rate that is variable, or that tracks the Bank of England, you might benefit down the line from future rate cuts that are expected, but there are no guarantees.

Good luck with the move!

We've been receiving questions from readers today, reacting to the news of lower interest rates and wondering how it might affect them.

Our experts, business reporters Peter Ruddick and Michael Race, have been going through the submissions, and will soon be replying right here - stay tuned.

Image source, PA Media

Interest rates falling is "good news", Prime Minister Keir Starmer says.

In a post on X, he adds that since Labour entered government in July 2024, "interest rates have been cut five times".

"Homebuyers are £1,000 better off on their mortgages than they were a year ago. That's our Plan for Change in action."

As a reminder, the Bank of England makes its decisions independently to the government.

Despite welcoming the latest cuts to interest rates today, Liberal Democrat Treasury spokesperson Daisy Cooper has criticised how long it has taken to get here.

“This would have happened months ago if the Government was not acting as a roadblock to growth”, she said in a press release.

“Countless people will still be worried about keeping a roof over their head and putting food on the table until the Government get serious about growth, and is more ambitious on the cost of living crisis by taking on our proposals to cut energy bills in half.”

Shadow Chancellor Mel Stride has reacted to today's cut in interest rates, saying they should be "falling faster" than they are.

In a post on X, the Conservative MP says "Labour’s Jobs Tax and high borrowing have seen inflation almost double".

Stride adds that "rates are only coming down now to support the weak economy", which he says has been created by Chancellor Rachel Reeves.

"And yet she is planning to do yet more damage with tax rises in the autumn," he claims.

We've just been listening to the news conference from the Bank of England, as governor Andrew Bailey and his colleagues spoke to reporters following the change in interest rates. Here's the key lines:

• Interest rates have been cut to 4%, from 4.25%, after an unprecedented second vote by the Bank of England
• This should mean lower mortgages, but also lower returns on savings
• Governor Andrew Bailey says the Bank is committed to working towards the target inflation rate of 2%, but adds there are "real risks" to achieving it and economic growth continues to be subdued
• He is optimistic that rates will continue on a downward path, but adds there is "genuine uncertainty" about the future of these rates
• The unprecedented second vote by the Bank was "sensible to get a clear outcome", he says, and resulted in a five to four decision in favour of a cut to interest rates
• Pay growth is expected to slow this year, according to Bailey, and at the same time, food prices are expected to rise by 5.5% ahead of Christmas, deputy governor Clare Lombardelli says

Michael Race
Business and economics reporter

The cost of a food shop is climbing again, and the rise in food prices is a big contributor to the overall inflation rate, which measures the cost of living.

Food inflation is currently at 4.5%, which means groceries on average are 4.5% more expensive than they were last year, with the staples - bread, milk and eggs and meat all going up.

There's various reasons why this is happening - higher energy prices often drive up costs for everything, but also there have been increases in the minimum wage and National Insurance for employers, which is likely to have been passed on through price rises.

The Bank of England now thinks overall inflation will peak at 4% in September, which will be double its target of keeping it at 2% - that is why the decision to cut rates was so close today (5-4 in favour).

With the Bank predicted wage growth will slow, and with water, council tax and broadband bills having all increased, cost of living challenges remain for many households.