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”.
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.”
‘Encouraging’ direction on inflation despite ‘greater global uncertainty’, says Andrew Bailey
After 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.”
GDP recovery since pandemic higher than thought, says Bank of England
Recent 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.
How will the interest rate cut affect you? From inflation to mortgages
Low 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
Here’s what the Bank of England’s interest rate cut could mean for you
‘Process of repairing Britain has begun,’ says TUC
The 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.”
Tory shadow chancellor hits out at Labour over new inflation forecasts
Shadow 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.”
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