The move was widely expected following this week's higher-than-expected wage growth data and inflation figures.

Inflation has increased for the second month in a row.

Rent and mortgage spending grew 8.2% year-on-year in November, as more homeowners rolled off fixed rate mortgages onto higher interest rates.

Mortgage approvals are now at their highest level since the mini-budget in 2022.

Headline inflation reaccelerated in October to the highest rate since April 2024. 

Monthly GDP fell by 0.1% in September, with quarterly growth slowing to 0.1%.

The lender has passed on the full Bank Base Rate reduction plus an additional 0.50% cut.

The swaps market has been rising since mid-September.

Industry experts predict further reductions in the months ahead but say the Budget may slow the pace of future cuts.

The OBR says market expectations for interest rates remain volatile and predicts further increases in mortgage rates.