Bank of England interest rate cut to help slash mortgage bills – live

Chiming 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.”

The 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.”

The pound remained up on the previous day’s close, rising from $1.2890 to $1.2996 as of 4pm.

Reacting 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.”

Kyle 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.”

Homeowners 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.

Bank 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.”

Bank 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.”

The 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.”