The Bank of England has defied expectations and reduced the base rate by 0.25 per cent for the first time since August 2005.

Experts had forecast that although there was slight chance there would be a pre-Christmas cut, the Bank would hold rates at 5.75 per cent until the New Year.

However, the introduction of the new 5.5 per cent rate has been greeted with delight by finance professionals.

Michael Coogan, director general of the Council of Mortgage Lenders, said: "A reduction in interest rates is exactly what the market needs and will benefit consumers.

"This will reduce the risk of payment shock for the 1.4 million borrowers coming off fixed rates in the next year."

David Kuo, head of personal finance at advice website Fool.co.uk, commented that "consumers should not look a gift horse in the mouth" and suggested that some people may be able to "capitalise on the rate cut".

He recommended that people with tracker mortgages should continue to make the same repayments as they did when the rate was at 5.75 per cent in order to cut the interest they will be charged in the long-term.