The Bank of England’s Monetary Policy Committee (MPC) has cut interest rates by 0.25%, bringing them down to 5.5% from 5.75%.

It is the first time the MPC has cut interest rates since August 2005 and the decision has been made following mounting pressure from across the country, as widespread concern has developed over the effect five interest rate rises since August 2006 have had on the economy.

Edward Menashy, chief economist with Charles Stanley Stockbrokers, said: “Although the MPC might have preferred to wait before reducing the Base Rate, the deterioration in the UK economy has become serious, with a sharp decline in mortgage lending, faltering house prices, public sector stimulus fading, a decline in commercial property more severe than 1980 and a faltering world economy.”

He added: “Lower interest rates give a boost to the bond and equity market but reduce the attraction to the currency. These developments were foreshadowing today’s decision.”