The Bank of England has lowered its base rate to 4.75% amid signs of cooling inflation.
- This marks the first time since June 2023 that the rate has fallen below 5.00%.
- The Monetary Policy Committee voted 8-1 in favour of this rate cut.
- Despite recent fiscal policy changes, this decision aims to support economic growth.
- Market reactions suggest a cautious approach to future rate cuts due to inflation concerns.
The Bank of England has reduced its base rate to 4.75%, a significant move marking the first drop below 5.00% since mid-2023. This decision comes as inflation eases to 1.7%, below the Bank’s 2% target, following a peak of 11.1% in October 2022. The Monetary Policy Committee (MPC), observing these shifts, voted by a majority of 8-1, endorsing the rate cut to stimulate economic growth.
Despite the Bank’s move, fiscal policy changes like those in the Labour’s recent Budget have stirred caution in market circles. Nicholls Mendes of John Charcol highlights that while the decision was expected, the changes in fiscal outlook could pressure future monetary policies. The market has noted a rise in gilt yields, indicating increased government borrowing costs, which may prompt a more measured pace in any subsequent rate reductions.
While this rate adjustment was anticipated amidst an international trend of cuts by central banks in Europe, it serves as a relief for mortgage borrowers. Ryan Davies from Bluestone Mortgages suggests buyers on the housing ladder will likely welcome this decision. However, due to volatility in swap rates, lenders’ pricing may fluctuate, urging consumers to consider professional mortgage advice.
Professionals within the mortgage and financial sectors have shared optimistic outlooks, emphasising the role of brokers in guiding borrowers through this evolving economic landscape. Ben Allkins of Just Mortgages notes a positive sentiment in the potential for eased swap rates, which could incentivise lenders to reassess their pricing strategies, aligning them with end-of-year lending goals.
Rob Clifford of Stonebridge anticipates that while the rate cut is promising, external factors, such as fiscal measures from the Labour Budget and international economic developments, could influence the Bank’s future actions. This environment of cautious optimism is mirrored by others in the industry who stress that despite easing rates, borrowers must remain vigilant and informed.
The Bank of England’s recent rate cut to 4.75% is poised to influence the UK’s economic landscape, though complexities remain.
