Bank of England cuts interest rates as borrowing costs to fall ‘gradually’
UK interest rates have been cut for the second time this year. The Bank’s Monetary Policy Committee (MPC) announced that rates were being reduced from 5% to 4.75% today, November 7.
The Bank of England has forecast a “gradual” reduction in borrowing costs despite uncertainty following the autumn Budget. Governor Andrew Bailey said UK inflation falling below its 2% target meant policymakers had been able to cut rates to the lowest level since June last year.
He said: “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.”
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Rates were last cut by 0.25% in August, a decision that was driven by a slump in petrol prices and lower airfares. Since then, the latest official data showed UK Consumer Prices Index (CPI) inflation fell to 1.7% in September, the lowest level since April 2021.
Experts said inflation falling below the Bank’s 2% target level will encourage policymakers to continue easing interest rates, releasing some more pressure on borrowers and mortgage holders across the UK.
The base rate dictates how much interest you pay when you borrow money, so mortgages and credit card rates usually get more expensive when they go up. This means a cut in the base rate will be good news for homeowners who are on a variable deal.
Today’s decision means rates are now at their lowest point in more than year. The last time rates were below 5% was June 2023. The cut means borrowing money is cheaper, but it is likely to reduce returns for savers.