The decision will come as little surprise to financial markets, with the 0.25 basis point cut widely predicted by analysts.

The last decision in December was a hold, but today's cut is the third since August 2024 with interest rates having fallen 0.75 percentage points since the 5.25 per cent peak.

The next decision is on 20 March.

We explain what the Bank of England's decision to cut rates to 4.5 per cent means for your mortgage and savings - and whether rates will be cut again soon.

What does this mean for savers?

The base rate affects how much interest savers can earn on their money. In general, savings rates rise when the base rate is rising, and fall when it is falling.

When the Bank of England cut the base rate to 4.75 per cent in August from 5 per cent, This is Money analysis found at least 30 savings accounts had had their rates slashed or were pulled from the market altogether. 

Now that the base rate has been cut to 4.5 per cent, banks will likely move to cut rates quickly.

Markets are pricing in two more cuts to the base rate this year after today’s change.

Rachel Springall, finance expert at Moneyfacts says: ‘Savers who rely on their cash savings to boost their income are at the mercy of lower interest rates. 

'It has already been proven that cuts to the Bank of England base rate set the wheels in motion for the biggest banks in the country to cut rates, showing loyalty does not pay.’

The average easy-access rate has fallen from 3.17 per cent since February 2024, according to rates scrutineer Moneyfacts Compare. It now stands at 2.92 per cent.

The biggest banks pay an average of 1.66 per cent across easy-access accounts. 

While the average one-year fixed-rate account is today 4.19 per cent. It has fallen from 4.87 per cent since the start of 2024. 

Springall believes challenger banks, which pay higher rates, will not be able to escape making cuts if the Bank continues to cut rates.