HOMEOWNERS with mortgages can breathe a little easier today.

As widely expected, the Bank of England yesterday announced a 0.25 per cent interest rate cut, lowering the base rate to 5.25 per cent.

There are also indications that there will be more interest rates this year and the base rate could go down as low as four per cent.

While sterling could devalue further if the Monetary Policy Committee indicates that further cuts are likely in the months ahead, the news was nonetheless good for people with mortages.

The Swindon-based Nationwide Building Society will cut its base mortgage rate from the first of next month following the decision by the MPC to cut the base rate.

The rate will be decreased by 0.25 per cent from 6.99 per cent to 6.74 per cent, leaving it about half a per cent lower than the standard variable rates of most other major high street lenders.

Savings rates are under review and any changes to these rates will be announced in due course.

The savings a customer would make with Nationwide on a £100,000 mortgage could be more than £12,000 over a 25-year term.

Myles Palmer, divisional director at the Marlborough office of Brewin Dolphin, the largest independent private client investment manager in the UK, said a cut had been inevitable.

"Virtually all economists had been predicting a cut in interest rates this month, so the announcement from the MPC came as no surprise," he said.

"There has been much discussion as to whether the committee would make a bold half-of-one-per-cent cut or a more conservative quarter-of-one-per-cent reduction.

"Yesterday's decision was in line with the cautious approach taken by MPC over recent months.

"The move is unlikely to have any impact on inflation but may offer some modest help on growth.

"Given the current state of the economy there is an understandable view that, at present, the MPC should worry less about inflation and more about achieving growth, so the pressure to reduce interest rates further remains."

The interest rate decision was announced after EOn became the fifth major power company to raise gas and electricity prices this year.

as many food and staples costs have been increasing both in the UK and globally.