The Bank of England has cut interest rates for the second time this year, in good news for mortgage-holders and other borrowers.
Policymakers at the Bank of England opted to reduce interest rates to 4.75 per cent today, down from 5 per cent. They had also been cut by 0.25 percentage points in August, which marked the first reduction since 2020, before being kept the same in September.
As a result, homeowners with tracker mortgages will see their payments fall by an average of £28.98 a month, while standard variable rates should reduce by an average of £17.17, according to UK Finance.
The decision by rate-setters today comes after chancellor Rachel Reeves announced nearly £70bn of extra annual spending, funded by business-focused tax hikes and additional borrowing, and as the UK awaits the impact of a second Donald Trump presidency in the United States.
Bank of England governor Andrew Bailey struck a more cautious tone on future cuts, but insisted there is a “good and encouraging” direction on falling inflation in spite of “greater global uncertainy”.
Key points
- Bank of England cuts interest rates by 0.25 per cent
- Pound rallies after Bank announces rate cut and inflation forecasts
- How will the base rate cut affect mortgage bills?
- Inflation below 2 per cent target for the first time in three years
- Budget could threaten longer-term interest predictions
Economists are rolling back predictions for a rapid succession of rate cuts over the next year
Wednesday 6 November 2024 22:12 , Barney DavisJames Smith, developed market economist for ING, said: “The Budget won’t change the Bank’s decision to cut rates again this week.
“But it does question our long-held view that rate cuts will speed up from now on.
“The risk is that this happens later, and the Bank decides to keep rates on hold again in December.
“A cut at the final meeting of the year looks fairly 50:50, and a lot will depend on the two inflation reports we get between now and Christmas.”
Inflation fell below the Bank of England’s 2 per cent target in September for the first time in three years
Wednesday 6 November 2024 22:14 , Barney DavisExperts said inflation falling below the Bank’s 2 per cent target level will encourage policymakers to continue easing interest rates, releasing some more pressure on borrowers and mortgage holders across the UK.
Andrew Goodwin, chief UK economist for Oxford Economics, said the outcome of the Bank’s Monetary Policy Committee (MPC) meeting “looks virtually certain”, although some members could still opt for rates to be kept the same.
MPC members Huw Pill and Megan Greene are the most “unpredictable”, he said, with lingering concerns over services sector inflation and wage growth.
The Monetary Policy Committee meets in the week after Chancellor Rachel Reeves announced almost £70 billion of extra annual spending, funded by business-focused tax hikes and additional borrowing.
The Office for Budget Responsibility (OBR) said the sharp increase in spending will contribute to higher inflation, although it will also help drive stronger economic growth.
Inflation is forecast to average 2.5 per cent this year and 2.6 per cent next year before coming down, assuming “the Bank of England responds” to help bring it to the target rate, the OBR said.
Bank of England expected to cut interest rates today
08:40 , Albert TothInterest rates are widely expected to be cut today, with most experts predicting a drop from 5 per cent to 4.75 per cent. The Bank of England decision will announced at midday UK time.
The change will make the cost of borrowing cheaper in the UK, but also lessens returns on savings.
Interest rates are a key tool that the Bank uses to control the level of inflation. After the drop from 5.25 per cent to 5 per cent in August, inflation also dropped unexpectedly.
In September, the inflation rate (CPI) reached 1.7 per cent, dropping below the Bank’s 2 per cent target in S for the first time in more than three years.
This is understood to be a driving factor behind today’s decision. However, tax changes announced at Labour’s Budget in October and Donald Trump’s victory in the US have caused some market uncertainty.
Average UK house price hit record high in October
08:44 , Albert TothHouse prices increased by 0.2 per cent in October, the fourth monthly increase in a row, Halifax has reported. The average house price was £293,999, surpassing a previous peak set in June 2022 (£293,507).
Property values increased by 3.9 per cent annually, slowing from a 4.6 per cent increase in September.
Amanda Bryden, head of mortgages at Halifax, said: “That house prices have reached these heights again in the current economic climate may come as a surprise to many, but perhaps more noteworthy is that they didn’t fall very far in the first place.
“Despite the headwind of higher interest rates, house prices have mostly levelled off over the past two and a half years, recording a 0.2 per cent increase overall.
“That’s a significant slowdown compared to the 21 per cent rise we saw in the equivalent period from January 2020 to the summer of 2022.”
Cost of living fears rise as pubs and supermarkets warn of Budget “double whammy”
08:58 , Albert TothSeveral British companies have warned of rising costs to consumers in the wake of Labour’s Budget.
Business leaders from Marks and Spencer, Wetherspoon and Persimmon all join a growing list of bosses who have expressed concern.
Marks and Spencer’s Stuart Machin said the retailer is expecting to take a £60 million hit due to the “double whammy” of rises to employer national insurance contributions and the national living wage.
Read more:
Cost of living fears rise as pubs and supermarkets warn of Budget “double whammy”
Trump win could cause “full-blown recession” in Europe, ING says
09:14 , Albert TothAnalysis from ING has warned that Trump’s victory in the US could make “Europe’s worst economic nightmare comes true” as the president-elect looks to introduce a 10 per cent tariff on all non-US goods.
Researchers from the Dutch investment bank wrote: “A looming new trade war could push the eurozone economy from sluggish growth into a full-blown recession. The already struggling German economy, which heavily relies on trade with the US, would be particularly hard hit by tariffs on European automotives.
“Additionally, uncertainty about Trump’s stance on Ukraine and NATO could undermine the recently stabilised economic confidence indicators across the eurozone. Even though tariffs might not impact Europe until late 2025, the renewed uncertainty and trade war fears could drive the eurozone economy into recession at the turn of the year.”
Comment | How a Trump presidency could blow the British economy out of the water
09:46 , Andy GregoryWhat will Keir Starmer be most worried about as he contemplates a second Donald Trump presidency? Until recently, Ukraine has been top of the UK government’s list, given the prospect Trump might unilaterally try to end the war – and not necessarily on terms favourable to Ukraine.
However, it is now dawning on UK ministers that Trump’s threat to impose 60 per cent tariffs on imports from China and 10 or 20 per cent on those from everywhere else including the UK, could inflict huge damage on the British economy. There are growing fears the UK’s trade with its biggest single export market in the US will be hit hard.
Read the full analysis by our columnist Andrew Grice here:
How a Trump presidency could blow our own economy out of the water
Norway’s central bank keeps interest rates at 16-year high
09:49 , Andy GregorySweden's central bank has cut its key interest rate today to 2.75 per cent from 3.25 per cent, as expected, while the Norwegian central bank held its policy interest rate unchanged at a 16-year high of 4.5 per cent.
Pound slightly up ahead of interest rates announcement
10:03 , Andy GregoryThe pound was up slightly against the US dollar as of 10am, sitting at $1.2913 compared to $1.2890 at the previous close.
The euro at 10am was £0.8325 compared to £0.8325 at the previous close.
UK house prices surpass 2022 to hit record high
10:32 , Andy GregoryAverage UK house price a record high last month, with the cost of a home averaging just below £294,000, according to an index.
House prices increased by 0.2 per cent in October, marking the fourth monthly increase in a row, Halifax reported.
The average house price was £293,999, surpassing a previous peak in June 2022.
Property values increased by 3.9 pe rcent annually, slowing from a 4.6 per cent increase in September.
Full report: Bank of England poised to cut UK interest rates for second time this year
11:00 , Andy GregoryUK borrowing costs are set to be cut for the second time this year, despite tax changes and a Donald Trump victory in the US casting uncertainty over the future path of interest rates.
Most economists think policymakers at the Bank of England will opt to reduce interest rates to 4.75% on Thursday.
Rates currently sit at 5 per cent after being cut by 0.25 points in August, the first reduction since 2020, then kept the same in September.
Read the full report here:
Bank of England poised to cut UK interest rates for second time this year
Interest rates drop ‘looks virtually certain’, analyst says
11:14 , Andy GregoryInflation falling below the Bank of England’s 2 per cent target level will encourage policymakers to continue easing interest rates, experts believe.
Andrew Goodwin, chief UK economist for Oxford Economics, said the outcome of the Bank’s Monetary Policy Committee meeting “looks virtually certain”, although some members could still opt for rates to be kept the same.
MPC members Huw Pill and Megan Greene are the most “unpredictable”, he said, with lingering concerns over services sector inflation and wage growth.
UK could attempt to talk Trump out of tariff war, Reeves tells MPs
11:33 , Andy GregoryThe UK will make “strong representations” to Donald Trump about plans for tariffs which could hit British economic growth, and will use the months before Mr Trump’s inauguration in January to “prepare for different eventualities”, Rachel Reeves has said.
The chancellor added that she is not “sanguine” about the president-elect’s plans, but is “optimistic” about the UK’s ability to shape the global economic agenda.
Mr Trump has said he wants to increase tariffs on goods imported from around the world by 10%, rising to 60 per cent on goods from China, as part of his plan to protect US industry.
Higher US import tariffs would reduce global economic growth by about one percentage point over the next two years, according to analysis from the National Institute of Economic and Social Research (Niesr).
For the UK, Niesr estimates economic growth would slow to 0.4 per cent in 2025, down from a forecast of 1.2 per cent.
UK could attempt to talk Trump out of tariff war, Reeves tells MPs
Bank rate-setters expected to vote eight to one in favour of cut
11:46 , Andy GregoryEconomists expect that the Bank of England’s nine-member Monetary Policy Committee will vote in favour of a cut, after voting five to four in favour of the most recent cut in August.
A Bloomberg survey found economists expect the vote will be split eight to one this time, with Catherine Mann expected to be the only hawk opposing a cut.
Bank of England cuts base rate by 0.25 per cent
12:04 , Andy GregoryThe Bank of England’s Monetary Policy Committee has voted eight to one to cut interest rates by 0.25 per cent.
In a boost for borrowers, the base rate now sits at 4.75 per cent. It marks the second cut since 2020, after rate-setters narrowly opted to reduce rates from a 16-year high of 5.25 per cent in August.
Interest rate cut is welcome news for millions of families, says Rachel Reeves
12:06 , Andy GregoryFollowing the Bank of England’s decision to cut the base rate, chancellor Rachel Reeves, said: “Today’s interest rate cut will be welcome news for millions of families, but I am under no illusion about the scale of the challenge facing households after the previous government’s mini-budget.
“This government’s first Budget has set out how we are taking the long-term decisions to fix the foundations to deliver change by investing in the NHS and rebuilding Britain, while ensuring working people don’t face higher taxes in their payslips.”
Budget forecast to increase inflation by 0.5 per cent in 2026, Bank of England says
12:08 , Andy GregoryInflation is expected to stay higher for longer than previously forecast following spending and tax rises announced in Rachel Reeves’ Budget, the Bank of England said.
Headline consumer price index (CPI) inflation is set to return to the Bank’s 2 per cent target in the second quarter of 2027, about a year later than previously forecast.
Inflation will peak at about 2.8 per cent in the third quarter of next year, before falling during 2026 and early 2027, partly pushed up by energy prices and the Budget measures.
Policies in the Budget are forecast to add just under 0.5 percentage points to inflation in 2026.
Bank weighs impact of increased minimum wage and employer taxes
12:11 , Andy GregoryAs it forecast that policies in Rachel Reeves’ Budget would push inflation up by 0.5 per cent in 2026, the Bank of England said increases to employer taxes and the minimum wage could prove to be “more inflationary” if prices are passed on to consumers.
Laying out the expected effects of the policies on Thursday, policymakers wrote: “On the one hand, higher labour costs could constrain firms’ cash-flows if there was limited pass-through to pricing. This in turn could moderate wage growth and further loosen the labour market through reduced labour demand.
“On the other hand, the increase in labour costs could prove more inflationary if upward pressure on prices were passed on to consumers.”
Likely that interest rates will keep falling, says governor Andrew Bailey
12:20 , Andy GregoryGovernor Andrew Bailey said UK inflation falling below its 2 per cent target meant policymakers had been able to cut rates to their lowest level since last June.
“We need to make sure inflation stays close to target, so we can’t cut interest rates too quickly or by too much,” he said.
“But if the economy evolves as we expect, it’s likely that interest rates will continue to fall gradually from here.”
Pound rallies after Bank announces rate cut and inflation forecasts
12:21 , Andy GregoryThe pound strengthened after the Bank's latest rate cut and as it hiked its inflation outlook, partly due to measures announced in the Budget.
Sterling lifted 0.4 per cent against the US dollar to $1.293, and was 0.2 higher against the euro at €1.202.
Tory shadow chancellor hits out at Labour over new inflation forecasts
12:31 , Andy GregoryShadow chancellor Mel Stride said: “This will be welcomed by millions of homeowners and builds on the work the Conservatives did in office to hold inflation down.
“However, the independent OBR and the Bank of England set out that as a result of Labour’s choices in the Budget last week inflation will be higher. The government must not undo the hard work the last government did.”
‘Process of repairing Britain has begun,’ says TUC
12:42 , Andy GregoryThe Trades Union Congress has welcomed the latest interest rate cut and urged the Bank of England to keep reducing its base rate.
“Today’s rate cut was the right decision, and the Bank of England should now keep moving with further reductions,” said TUC chief Paul Nowak.
“With inflation below the government’s target, ongoing cuts will support the economy and relieve cost of living pressures on households and businesses.
“It’s good that the Bank’s forecast has recognised the gains to growth that October’s Budget will bring. With increased investment, stronger public services and lower interest rates, the process of repairing and rebuilding Britain has begun.”
How will the interest rate cut affect you? From inflation to mortgages
12:52 , Andy GregoryLow interest rates are used to discourage people from piling up their money in savings. High interest rates encourage saving because people get a better return for the money you are putting away. This in turn has an effect on the price of goods.
When interest rates are low, people might spend more and this might cause retailers to put up the price of goods. When rates are high, demand might fall as people put more money into their savings pots. This, in theory, should drive down the prices of goods and services.
However, rising prices are not a direct result of interest rate changes. Other things, including the supply of money and underlying costs, affect prices and cause inflation. Interest rates can only help manage inflation, not control it directly.
My colleagues Albert Toth and Jabed Ahmed have more details on what impacts the latest cut will have:
How will the interest rate cut affect you? From inflation to mortgages
GDP recovery since pandemic higher than thought, says Bank of England
12:58 , Andy GregoryRecent revisions in the UK’s National Accounts, compiled by the ONS, suggests that the recovery in GDP since the pandemic was stronger than previously estimated, particularly in late 2021 and early 2022, the Bank of England said.
The level of real GDP in the second quarter of 2024 was 2.9 per cent higher than the final quarter of 2019, which was 0.5 per cent higher than the previous estimate, the Bank noted.
‘Encouraging’ direction on inflation despite ‘greater global uncertainty’, says Andrew Bailey
13:12 , Andy GregoryAfter the Bank of England cut interest rates to 4.75 per cent, governor Andrew Bailey pointed to a “good and encouraging” direction on falling inflation.
He said: “The disinflation process not only continues but actually has been faster than we expected, and that’s good and encouraging. There is greater uncertainty out there. There is greater global uncertainty without doubt.”
Referring to tax and spending increases announced in the autumn Budget, he added: “And of course there are domestic uncertainties. We need to obviously see how the Budget measures pass through in terms of their economic effects.”
Public investment in Budget will ‘more than’ offset impact of higher taxes on growth, says Bailey
13:25 , Andy GregoryBank of England governor Andrew Bailey has said high levels of public investment announced in the Budget will “more than” offset the impact on growth of higher taxes, pushing up economic growth.
Mr Bailey pointed to a Bank projection that measures announced in the Budget would boost gross domestic product growth by about 0.75 percentage points versus previous forecasts in a year’s time.
He said: “This reflects the stronger, and relatively front-loaded paths for government consumption and investment more than offsetting the impact on growth of higher taxes.
“Overall, fiscal policy is still expected to tighten over the forecast.
“But all else equal, the changes announced in the Budget are expected to reduce the margin on spare capacity in the economy over the forecast period.”
Andrew Bailey says Bank of England will ‘work very closely’ with Trump administration
13:39 , Andy GregoryBank of England governor Andrew Bailey said the central bank will “work very closely” with the US administration – but stressed it would not speculate over potential economic policies under a Donald Trump presidency.
“We will work with all the US administrations ... that’s our job, that’s what we do,” Andrew Bailey said.
But he said it was “not useful or wise to enter into speculation” about what policies might be introduced under Mr Trump, including proposed higher tariffs on US imports.
“I’m not going to make any presumptions about what will happen,” he said, adding: “I’m sure there will be a very open dialogue between us and the US administration.”
Rachel Reeves insists new government is ‘world away’ from previous parliament
13:53 , Andy GregoryChancellor Rachel Reeves has insisted that, with interest rates “on a downward path”, the Labour Government is “a world away from the last Parliament”.
Speaking on a visit to Manchester Victoria railway station, she said: “Interest rates are now on a downward path, evidenced by the cut in the interest rates today by the Bank of England.”
She added: “Both the Office of Budget Responsibility (OBR) and indeed the Bank of England forecast today shows that the economy is growing, interest rates and inflation are coming down.
“But that is a world away from the last Parliament, which was the worst Parliament on record for living standards – inflation reaching more than 11 per cent, interest rates spiking after the mini-Budget, and growth stagnant too.”
Bank of England expects GDP growth of 1.7% in final quarter of 2025
14:07 , Andy GregoryThe Bank of England is forecasting GDP growth of 1.7 per cent in the final quarter of 2025, up from a forecast of 0.9 per cent in August.
However, its projections for the same period in 2026 are down from 1.5 to 1.1 per cent.
The measures announced in Rachel Reeves’ Budget are provisionally expected to boost GDP by around 0.75 per cent at their peak “as the stronger, and relatively front-loaded, paths for government consumption and investment more than offset the impact on growth of higher taxes”.
The increase in employer National Insurance contributions is then assumed to lead to a small decrease in potential supply over the forecast period, the Bank said.
Back-to-back rate cuts unlikely, analyst says
14:21 , Andy GregoryThe minutes from the Monetary Policy Committee’s meeting today suggest a further rate cut in December is unlikely, according to Suren Thiru, economics director at the Institute of Chartered Accountants.
“This interest rate cut is a timely boost to both households struggling with their mortgage bills and businesses after a difficult budget,” said Mr Thiru.
“Though the UK is in the middle of a policy loosening cycle, this latest cut is unlikely to noticeably ease the financial squeeze on people and businesses, given the multitude of rate rises that preceded this recent shift in direction.
“While the vote split suggests that the decision to cut rates was emphatic, the rather cautious meeting minutes suggest that a December rate cut is unlikely, particularly given greater global uncertainty and the bank forecasting higher inflation.
“Even though interest rates have further to fall, the upward pressure on inflation from the budget and growing global risks, including possible new US tariffs, could mean that policy is loosened more modestly than many anticipated.”
Bank of England governor warns of risks of ‘fragmentation of world economy'
14:35 , Andy GregoryBank of England governor Andrew Bailey has stressed the importance of watching out for the “fragmentation of the world economy”.
Asked about Donald Trump’s mooted policy of raising import tariffs, he said: “Let’s wait and see where things get to. I’m not going to prejudge what might happen, what might not happen, where policy goes to.”
Mr Bailey added: “I do think we have to watch very carefully the fragmentation of the world economy. I will say that.”
When asked whether he agreed with Mr Trump that “tariff” is the most beautiful word in the dictionary, Mr Bailey said: “There are many words in the dictionary. I don’t have a favourite word or a most beautiful word in the dictionary. I’m not sure I’m going to join in that debate.”
Video report: Interest rates cut by Bank of England in good news for mortgage-holders
14:50 , Andy GregoryBailey plays down recent discussions with Reeves over market reaction to Budget
15:04 , Andy GregoryBank of England governor Andrew Bailey played down recent discussions with chancellor Rachel Reeves over the impact of the Budget on markets.
He said: “I’m now on the sixth chancellor since I was appointed and the fifth since I started the job. I talk to all chancellors regularly.
“You shouldn’t read anything into that. It’s a very regular thing to do. It’s an important piece of coordination between the authorities. You shouldn’t read anything into it in terms of an unusual practice.”
How much will mortgage costs decrease by due to today’s announcement?
15:19 , Andy GregoryHomeowners with tracker mortgages are set to see their payments fall by an average of £28.98 a month as a result of the Bank of England lowering its base interest rate, analysts have said.
According to UK Finance, someone on a standard variable rate (SVR) mortgage will see their monthly payment reduce by £17.17 on average.
Around 629,000 outstanding homeowner mortgages are trackers, which follow the movements of the base rate, while 693,000 are SVR deals, which borrowers end up on once their initial mortgage deal ends.
Four-fifths of outstanding homeowner mortgages, totalling 6,882,000, are fixed-rate deals, and will not see any immediate change in their payments.
Markets now expecting just two further cuts by mid-2025, analyst says
15:35 , Andy GregoryKyle Chapman, an analyst at Ballinger Group, said the Bank of England’s announcement today was “very much a hawkish cut”, in signalling that further cuts will remain gradual.
“The budget has fundamentally altered the calculus for the Bank of England’s rate path. It keeps the BoE on a path of quarterly rate cuts for the foreseeable future, and the market is now only expecting two extra cuts by mid-2025,” said Mr Chapman.
“The extra short-term stimulus is expected to materially increase inflationary pressures, and the projections have validated the gilt market’s expectation for a slower pace of policy easing. That should bode well for sterling on the crosses and GBP/EUR could rise further from here.
“It is notable that the Bank sees no material GDP boost from the budget in the longer term. While 2025 is expected to be significantly higher, the forecasts thereafter continue to expect a low potential growth rate. That is another blow to Reeve’s ‘growth-first’ reasoning behind the budget in the first place.”
Cut does not mean all mortgages will fall substantially in short-term, says broker
15:54 , Andy GregoryReacting the Bank’s announcement, Andrew Montlake, managing director of Coreco mortgage brokers, said: “Whilst this cut will be welcomed by all those looking to buy or remortgage in the near future, it is important to note that this does not necessarily mean that mortgage rates will drop substantially in the short-term.”
He added: “However, the good news is that this shows the Bank of England is confident that even amongst all the uncertainty they have now tamed inflation sufficiently to be able to continue with their longer-term plans to reduce interest rates.”
Pound remains up after Bank of England rate cute
16:12 , Andy GregoryThe pound remained up on the previous day’s close, rising from $1.2890 to $1.2996 as of 4pm.
Bank of England ‘should move further and faster’ cutting interest rates, says IEA
16:31 , Andy GregoryThe Bank of England “should move further and faster” in cutting interest rates, an analyst has said.
“The Bank of England was right to cut interest rates again today but should move further and faster,” said Julian Jessop, of the right-wing Institute of Economic Affairs think-tank. “Rates are still higher than necessary to keep bearing down on inflation, especially when the Bank is continuing to tighten policy by running down its holdings of government bonds.
He added: “Inflation is now back close to target and expected to remain there, but the full effects of past increases in interest rates and the deceleration of money growth have yet to feed through.
“The additional uncertainty and market volatility triggered by the Budget and Trump’s victory had prompted some to speculate that the MPC might hold off today. Delivering the rate cut that almost all had expected should therefore help to reassure households, businesses, and investors.
“The Bank has also endorsed the OBR view that the additional spending and borrowing in the Budget will provide a temporary boost to growth and inflation. This could slow the pace of rate cuts in future, though the Bank stuck to its guidance that rates will fall ‘gradually’ (perhaps a quarter point every three months, taking the Bank rate to 3.75% by the end of next year).
“However, the Bank’s forecasts are based on assumptions about the path of market interest rates which already look too optimistic. The increases in taxes and other business costs in the Budget, compounded by the hit to confidence, should also limit any upsides to growth or inflation.
“The Bank acknowledged the uncertainties here, implying rates could still be cut more quickly. But there is a clear risk that the MPC is too slow to respond.”
IPPR think-tank says Bank of England should be bolder in cutting rates
16:59 , Andy GregoryChiming with the sentiments of the think-tank whose former director-general backed Liz Truss’s mini-Budget, the progressive Institute for Public Policy Research (IPPR) has also said the Bank of England should move “further and faster” on cutting interest rates.
Carsten Jung, head of macroeconomics at IPPR, said: "Given low inflation and slow growth, the Bank of England should have cut rates by more. A further and faster rate cut is needed to support economic recovery.
“The Bank of England confirmed that the new government's Budget will likely improve economic growth. We think it is unlikely to put much upward pressure on inflation, consistent with recent evidence from the US. This should encourage the Bank of England to be bolder in reducing interest rates.
“Separately, the Treasury transfers about £20bn annually for quantitative easing losses at the Bank of England – funds that could cover half of last week's increase in the public services spending. The UK is an international outlier in this practice, which should be reconsidered."
Chancellor will be pleased with Bank’s assessment of her Budget, analyst suggests
17:26 , Andy GregoryRachel Reeves “will be pretty pleased” with the Bank of England’s assessment of her Budget, an analyst has suggested.
“After two weeks of volatile political theatre the Bank’s decision to stick to the script and cut rates is very welcome. Inflation remains moderate and economic growth positive, if anaemic,” said Nicholas Hyett, an investment manager at Wealth Club.
“The Chancellor will be pretty pleased with the Bank’s assessment of the last week’s budget. Yes it will drive a modest pickup in inflation, but GDP is also expected to be around 0.75% higher next year than it would otherwise have been.
“The big unknown is the future path of wage growth. A relatively tight labour market has driven sticky service inflation, but now seems to be easing. The problem is that rises to the minimum wage and National Insurance contributions in the Budget have the potential to keep service inflation higher going forwards if employers pass those costs on.
“All in all, this is far from a showstopping set of MPC minutes – it feels like the Bank is happy to wait in the wings and see how the politics plays out.”
Mortgage rates could briefly rise despite base rate cut, says Rightmove analyst
17:50 , Andy GregoryMortgage rates could briefly increase despite the Bank of England cutting rates, an analyst has said.
Rightmove’s mortgage expert, Matt Smith, said: “This base rate decision comes at the end of a run of important macro-economic and political events on both sides of the Atlantic.
“All of this has resulted in a view that base rate will be cut at a more moderated pace than previously expected and has been priced in by lenders. Therefore we are likely to see average mortgage rates drift up a little in the short term, before starting to fall back again.
“Today’s decision will probably help relieve pressure on lenders to increase rates as we had started to see. If the last few weeks has taught us anything, it is that the UK mortgage market remains competitive, but headline pricing will continue to be impacted by events both in the UK and overseas.”
Interest rate cut could mean tougher conditions for savers
18:12 , PAThe interest rate cut could mean tougher times for savers – increasing the need to shop around for the top deals.
According to Moneyfactscompare.co.uk, the average easy access savings rate on offer has already fallen from 3.15 per cent in August to 3.03 per cent in November.
The average easy access Isa rate has fallen from 3.36 per cent to 3.24 per cent between August and November.
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, suggested some savers may want to consider savings accounts offered by challenger banks.
“Challenger banks are offering attractive returns and it would be unwise to overlook them,” she said, adding: “Savers need to proactively keep on top of the best rates and review their pots regularly to see if they are getting a raw deal.”
Cut provides ‘measure of relief’ for families and firms
18:35 , Andy GregoryThe Bank of England’s interest rate cut will “provide a measure of relief for many households and firms”, a business advocacy group has said.
Muniya Barua, deputy chief executive at BusinessLDN, said: “This small rate cut will provide a measure of relief for many households and firms struggling with high borrowing costs and concerned about the tax hikes announced in the Budget.
“With rising taxes weighing on business confidence, it’s vital that the chancellor’s Mansion House speech makes further progress towards unlocking investment.
“Looking ahead, next year’s spending review should include a longer-term funding deal for Transport for London to support the city’s future growth, put the capital’s devolution deal on a par with other trailblazer regions and provide further public investment to tackle the city’s housing crisis.”
Sainsbury’s boss: Budget-hit businesses will mean higher inflation for shoppers
19:01 , Andy GregorySainsbury’s has said shoppers will face higher prices as a result of the surprise tax changes announced in last week’s Budget, which will hit the retailer with an extra £140m in costs.
The supermarket giant’s boss Simon Roberts said there is “already too much pressure in the pipe” for the retailer to swallow an unexpected cost rise without it affecting prices.
It has become the latest business to warn that increases to company national insurance contributions, coupled with a change in the threshold, are likely to result in pressure on consumers.
The Bank of England warned that inflation could rise higher than its new forecast that Rachel Reeves’ Budget would push inflation up by 0.5 per cent in 2026 if prices are passed on to consumers.
Sainsbury’s boss: Budget costs to businesses will lead to higher inflation
