BREAKING NEWS
Bank of England have just cut interest rates by a .4% to 4.75%. This continues the falls from their height of 5.5%, and will relieve some pressure on borrowers.
Andrew Bailey, Governor of the Bank of England, said: “Inflation is just below our 2 per cent target and we have been able to cut interest rates today. We need to make sure inflation stays close to target, so we can’t cut interest rates too quickly or by too much. But if the economy evolves as we expect it’s likely that interest rates will continue to fall gradually from here.”
Rachel Reeves added “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.”
Economists predict more cuts to the base rate next year, but at a slower pace. The BoE generally keeps rates high to tackle inflation, and then cuts as inflation reaches its target of 2%. It currently sits at 1.7%, but many expect it to rise back to 2% over the winter.
Mortgages rates
As 81% of borrowers are on a fixed rate mortgage, this cut won’t effect their repayments. Nick Mendes of brokers John Charcol said that he expects mortgage rates to resume their downward trend before the end of the year, likely returning to “the best rates we’ve seen recently, with further improvements anticipated into next year”.
However a drop in interest rates isn’t always instantly reflected in lenders changing their rates, as they take into account many factors including long-term predictions.
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