BoE governor Mark Carney has indicated that home owners in Brixton and Battersea could be paying even less for property loans.
The decision to cut interest rates to 0.25% was approved unanimously by the nine members of the Monetary Policy Committee and is the first change in interest rates since March 2009.
After announcing the base rate would fall from its previous record low of 0.5%, the governor said there was scope to cut the interest rate further.
He said that majority of MPC members backed further cutting the interest rate if subsequent data shows the economy is deteriorating.
Mr Carney said lenders have “no excuse” not to pass on the lower borrowing costs to customers and will be charged a penalty if they do not lend.
He added: “The MPC is determined that the stimulus the economy needs does not get diluted as it passes through the financial system.”
As part of a package of measures designed to boost the economy following the UK's vote to leave the EU last month, the Bank is also introducing a new Term Funding Scheme.
This will lend directly to banks at rates close to the new 0.25% base rate to encourage them to pass on the lower interest rates to businesses and households.
The MPC meeting on Thursday 4 August was the last before it moves to only meeting eight times a year, meaning that it is not scheduled to meet again until 3 November.
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