We're signing off for the day, but before we go, here are five stories that tell you everything you need to know about how today's interest rate cut affects the money in your pocket... 

Inflation has been coming down faster than the Bank of England thought, but it's likely to stay at its current level until the spring, Andrew Bailey has said. 

Speaking to broadcasters, the Bank of England governor said inflation should fall closer to the Bank's 2% target in April or May, helping interest rates to continue on a "gradual path down". 

The Bank keeps a close eye on inflation when making interest rate decisions. It usually raises the base rate to try to control inflation if it is too high.

Inflation has recently eased by more than expected, dropping to 3.2% in November from 3.6% in October and a peak of 3.8% in September. 

"It's actually coming down a bit faster than I think we thought it would," Bailey said. 

"We'll probably be around this level for a few months, but we think that come the spring, April, May time, we should see another sharp drop and take us, I hope, to around targets." 

He added that as this happens, he expects the pace of cuts to "ease off at some point" - but when that will be is still too uncertain to predict.

"I do think there is scope for this gradual path down to continue, but I don't put a number on it in terms of where that neutral rate is," he said. 

Today's interest rates cut could knock £100 off monthly mortgage payments for first-time buyers, according to Rachel Reeves. 

Speaking to broadcasters after the rate was cut from 4% to 3.75%, the chancellor said: "It's welcome news for families and businesses that the Bank of England have now cut interest rates six times since the general election, taking interest rates to 3.75%, the lowest in nearly three years, and the fastest pace of interest rate reduction for 17 years.

"What it means for a first-time buyer with an average-sized mortgage is £100 less a month because of the successive cuts in interest rates."

It's worth taking the time to understand how today's changes affect you and your wallet - especially when it's only 60 seconds.

Our data and economics editor Ed Conway explains everything you need to know about today's interest rate cut in just a minute in the video below... 

While today's interest rate cut is good news for borrowers, it's a slightly different picture for savers... 

A drop to 3.75% could mean the fairly strong savings rates seen recently could start to fall. 

Savers with the most flexible pots will be hit hardest by the cuts, according to Rachel Springall, finance expert at Moneyfacts. 

"Lowering the Bank's base rate also has an impact on the pricing of new fixed rate bonds or ISAs, which will disappoint savers who want a guaranteed return on their hard-earned cash," she said.

"It can take a couple of months for the savings market to catch up to rate cuts, so it's vital savers check the latest rates and switch if they are now getting a paltry rate. 

"Since the Bank of England Base Rate cut of 0.25% in August 2025, over 90% of savings providers have cut rates in some shape or form."

Moving into 2026, she said it will be essential for savers to review and switch to the top rates. 

"Savers will be dismayed by the continuation of fiscal drag, as any basic-rate taxpayer who moves up to the higher-rate tax bracket at 40% will see their Personal Savings Allowance (PSA) halved, from £1,000 worth of savings interest tax-free each year to just £500. There is still plenty of time to take advantage of an ISA before the cash ISA allowance is cut down in April 2027," she added. 

Harriet Guevara, chief savings officer at Nottingham Building Society, said: "For savers, the rate cut is a flag that the window for today's strongest rates will not stay open indefinitely. 

"While rates won't fall overnight, we are approaching a point where locking into fixed-rate savings or Cash ISAs now could provide valuable protection against gradually declining returns." 

Holly Tomlinson, financial planner at wealth management firm Quilter, said savings providers had already reduced rates in anticipation of a cut. 

"Savers are likely to feel the impact of today’s decision more quickly. That pressure on cash returns comes as the government moves ahead with changes designed to encourage more people to invest," she said. 

By James Sillars, business and economics reporter 

Looking at the market response to the Bank of England rate decision, we got the message that was expected.

The pound has remained steady against the dollar and euro, for example, because the Bank was clear it would remain cautious on the inflation outlook - and therefore rate reduction prospects.

That was despite the Bank's new expectations that inflation would return to its 2% target next year, rather than in 2027.

London Stock Exchange Group data suggested that only one further cut, to 3.5%, remained fully priced in by investors for 2026.

Earlier this week, that cut was expected by April.

The data showed that market participants had now shifted more towards June.

Much is going to depend on inflation and the wider economic data ahead if those members of the fractured monetary policy committee, who are opposed to rate cuts at the moment, are to change their minds.

Some of the first people to feel the positive impact of today's interest rate cut will be those on tracker mortgages. 

Around 533,000 people currently have this type of mortgage, according to the latest UK Finance data. 

Nationwide has already confirmed that homeowners with one of its tracker mortgages will see their rates automatically fall by 0.25% on 1 January. 

This is because tracker rates are directly pegged to the base rate. 

The payable rate on the lowest current tracker rates will dip below 4% for the first time since early February 2023. 

Halifax currently offers a 2-year tracker at 0.11% above base rate, which will reduce to 3.86% from 4.11% after a quarter point cut, said David Hollingworth, associate director at the country's biggest broker, L&C. 

That will save a borrower with a £200,000, 25-year repayment mortgage almost £28 per month or more than £330 per year. 

"Tracker rates have been gradually closing the gap on fixed rate options but are still behind the best of the fixes. However, with more base rate cuts expected next year, we will potentially see more borrowers wondering if following rates down could make for a better option in the longer run," Hollingworth said. 

"Trackers are also more likely to be free of any early repayment charge, which gives added flexibility. 

"However, there are no guarantees that rates will continue to drop, and so borrowers need to have some ability to cope with rising payments if rates take a turn." 

What about fixed rates? 

There will be no immediate change to borrowers' payments for those already on a fixed rate but today's cut is good news for those looking ahead to their next deal. 

Fixed rates have already been falling in recent weeks and months as anticipation of lower interest rates has grown. 

That looks set to continue, as easing inflation and a weaker labour market has seen rates that feed into fixed rate pricing falling further.

"Lenders are competing hard and there could be more scope for lenders to improve their rates in the new year when they will want to get off to a good start," Hollingworth said. 

"Although rates are already pricing in further Bank rate cuts next year, there's still scope for market expectation to see rates drift down further."

Inflation is expected to near the Bank's 2% target next year - considerably earlier than the early 2027 timeframe that had previously been forecast.

Inflation was recorded at 3.2% in November, it was announced yesterday - down from 3.6% in October and the recent peak of 3.8% seen in September. 

In the minutes of today's interest rate meeting, the Bank of England's Monetary Policy Committee said that "headline inflation was now expected to fall back more quickly in April to closer to 2%".

It said that measures in Chancellor Rachel Reeves' budget last month are likely to lower inflation by around 0.5 percentage points. 

This includes one-off support for household energy bills and freezing fuel duty which will kick in from April next year. 

Andrew Bailey was the only member of the Bank's Monetary Policy Committee to change his mind from last month's decision to hold the rate at 4%. 

The Bank of England governor opted for a 0.25 percentage point cut, tipping the vote in favour of a reduction, saying the UK has "passed the recent peak in inflation and it has continued to fall". 

While he said the rate will continue to fall, he warned that decisions on cuts could get tighter. 

"We still think rates are on a gradual path downward," he said. 

"But with every cut we make, how much further we go becomes a closer call." 

The pound, which had earlier weakened against the dollar, held firm at 1.34 dollars following the Bank's decision to cut rates.

Sterling was 0.2% higher at 1.14 euros.

On the London market, the FTSE 100 Index was largely unchanged, down 2.1 points at 9772.3.