Interest rates live updates: Bank of England base rate cut to help slash mortgage bills
Inflation fell below the Bank of England’s 2% target in September for the first time in three years
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Your support makes all the difference.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”.
Markets now expecting just two further cuts by mid-2025, analyst says
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.”
How much will mortgage costs decrease by due to today’s announcement?
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.
Bailey plays down recent discussions with Reeves over market reaction to Budget
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.”
Video report: Interest rates cut by Bank of England in good news for mortgage-holders
Bank of England governor warns of risks of ‘fragmentation of world economy'
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.”
Back-to-back rate cuts unlikely, analyst says
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.”
Bank of England expects GDP growth of 1.7% in final quarter of 2025
The 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.
Rachel Reeves insists new government is ‘world away’ from previous parliament
Chancellor 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.”
Andrew Bailey says Bank of England will ‘work very closely’ with Trump administration
Bank 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.”
Public investment in Budget will ‘more than’ offset impact of higher taxes on growth, says Bailey
Bank 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.”
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