The move follows other eurozone leaders agreeing to lower all the interest rates on bailout-out countries Ireland, Greece and Portugal pay on their loans.
The UK supplied £3.26bn to Ireland last year at a rate of 5.8 per cent.
That has now been cut to just 3.5 per cent.
"I'm pleased therefore they have now reduced those rates,” Osborne said in a statement.
"That enables Britain to cut its rate on its loan to Ireland, while ensuring all of the benefit goes to Ireland and not to higher interest rates paid to euro area governments."