Bank of England Cut Base Rate to 4.75%
The Bank of England’s Monetary Policy Committee (MPC) has implemented its second rate cut of the year, reducing the Bank Rate by 0.25% to 4.75%, with eight of the nine committee members voting in favour, with one member preferring to delay the decision by a month.
MPC’s minutes said the decision was influenced ‘by the need to squeeze remaining inflationary pressures out of the economy’
The cut has been anticipated widely by the markets following inflation dropping to 1.7% in September, marking the first time since April 2021 that it has fallen below the government’s 2% target.
Effects of The Autumn Budget
In the Autumn Budget, The Chancellor Rachel Reeves announced increases to minimum wages as well as tax increases, amongst other factors, which market experts expect to raise inflation. Commenting on this Governor Andrew Bailey of the MPC noted that there will be “some upward effect on inflation” with inflation projected to reach around 2.5% in 2025.
he Monetary Policy Committee (MPC) minutes highlighted uncertainties in the Labour market outlook, with wage growth remaining higher than anticipated. The minutes also noted that the inflation impact of the Budget will depend on how quickly increased costs translate into prices, wages, and employment adjustments.
Given these factors, the MPC emphasised a “gradual approach to removing policy restraint,” aiming to keep monetary policy sufficiently restrictive to support inflation returning sustainably to the 2% target over the medium term’
How will this affect mortgage rates?
For those on a tracker or variable rate mortgage, lenders are likely to reduce rates on both existing and new mortgages in the coming days, in line with the reduction in the Bank Rate.
However, borrowers on fixed-rate mortgages won’t see any immediate changes until their current deal expires. On the other hand, for those looking to lock into a fixed rate mortgage, there is no guarantee that this announcement will affect the pricing in the short term due to lenders considering other factors in their pricing such as swap rates, which are used as an indicator of what interest rates will be in the future, and the effects of the Autumn Budget.
Outlook
The MPC’s decision to cut the Bank Rate, alongside September's favourable inflation figures, has been welcomed across the nation. The previous rate reduction in August 2024 had a positive effect on market confidence, boosting activity in the property sector.
While this latest cut was widely anticipated, future rate cuts are now seen as less certain due to the impact of the October 30th Budget. Markets are increasingly betting that the Bank of England will hold off on any further rate cuts for the remainder of the year.
The Importance of Expert Guidance
Given the ever-changing market conditions, seeking the assistance of a mortgage consultant is more important than ever. With their expertise, you can navigate these fluctuations effectively and find the best possible mortgage options tailored to your needs.
Our experienced mortgage consultants are ready to assist you with personalised guidance every step of the way. For an initial consultation, speak with our experts or call us at 01628 564631. We're here to help you navigate your mortgage journey with informed advice and care.
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The information contained within was correct at the time of publication but is subject to change.
Your mortgage is secured on your property. Your property may be repossessed if you do not keep up repayments on your mortgage.
Source: Bank of England
