Interest rates cut by 0.25pc

Interest rates were cut this afternoon, bringing much-needed cheer to homeowners. Rates dropped by 0.25 per cent to 5.5 per cent, the first cut in two years.

It will knock around £16 a month off the cost of a typical £100,000 mortgage.

The Bank of England's nine-strong committee, led by Wolverhampton-educated Governor Mervyn King, gave in to overwhelming pressure from households squeezed by rising fuel, food and mortgage costs.

It has also been urged to make a cut by retail chains desperate to see shoppers spending on the high street this Christmas.

The "knife-edge" decision had been too close to call in the hours before the noon decision was announced.

Mr King and his colleagues fear a rate cut could push inflation above their two per cent target.

But the pressure to offer families some festive relief in the run-up to Christmas was too strong to resist.

* Soaring sales of novelty socks and other Christmas stocking favourites helped John Lewis offer some welcome cheer in the retail sector today.

The group said sales in its department stores and online operation last week rose 4.5 per cent year-on-year as socks, scarves and hats flew off the shelves.