Bank of England base rate cut to 3.75% - the lowest level since early 2023
The Bank of England has cut the base rate from 4% to 3.75%, the lowest level since February 2023.
The Monetary Policy Committee voted 5-4 in favour of reducing the cost of borrowing. Mortgage rates have been gradually coming down for months, and this trend is likely to continue given the UK’s economic outlook and the growing pressure to cut the base rate further.
Five members (Andrew Bailey, Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan
Taylor) preferred to reduce Bank Rate by 0.25 percentage points at this meeting. The
disinflation process was on track and the key question was how sustainably inflation would
settle at the 2% target.
"We still think rates are on a gradual path downward but with every cut we make, how much further we go becomes a closer call," says Bank governor Andrew Bailey. Chancellor Rachel Reeves also called it "good news for families with mortgages and businesses with loans" - but says there's "more to do."
The Bank's base rate influences the cost of borrowing. Cutting it can make mortgages cheaper, but can also mean lower interest on savings. Meanwhile, the Bank now expects no economic growth at the end of this year but expects inflation to fall closer to the 2% target sooner than expected.
The Budget included a set of policy measures that had a direct impact on inflation in the short term, which were likely to lower CPI inflation in April by around ½ percentage point.
Anthony Emmerson, director at Trinity Financial, says: “With the base rate now being cut by a quarter of a per cent, we hope this will lead to more buyers having the confidence to enter the market as mortgages become more affordable when compared to renting. With customers now having access to cheaper funds, it may very well have a positive impact on the outlook for growth in the UK, as people will have more disposable income available.”
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