Until today, the Bank of England Base Rate had been held at 0.5% since March 2009.
The Bank of England has also extended Quantitative Easing (QE) by £60bn to £435bn by a vote of 6-3.
In the second meeting of the Bank of England’s Monetary Policy Committee (MPC) since the UK’s momentous Brexit decision, members voted unanimously to cut the Base Rate to 0.25%.
The MPC also voted by 8-1 to introduce a scheme to buy £10bn of high-grade corporate bonds.
This is the lowest the rate has ever been and is a long way from the record high 17% interest rate recorded in November 1979.
The MPC decision came just days after the markets priced in a 98% chance of interest rates being cut.
A Mortgage Solutions poll on the direction of rates in August showed 51% polled thought rates would be maintained at 0.5%, with 43% expecting a 0.25% cut to 0.25%. Just 3.8% expected a cut of 0.5% or more.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “It is important that lenders immediately pass on the full benefit of the cut to those on tracker-rate mortgages and those on products linked to their lender’s standard variable rate.
“Swap rates are at all-time lows and we expect to see even more competitive fixed rates in coming days. It is already possible to fix for two years at less than 1% and for five years at less than 2%. These are astonishingly-low rates but the could go cheaper still. Lenders are keen to lend and will need to be competitive in terms of the rates they offer in order to attract new business.”
