Bank of England interest rate cut joy for mortgage holders as Reeves blames mini-Budget for inflation - live

The Bank of England has decided to cut interest rates for the first time in more than four years

Rachel Reeves admits taxes will rise in first Budget

The Bank of England has cut interest rates for the first time since 2020 as inflation continues to remain steady, holding at their two percent target for two consecutive months.

Bank Rate is currently 5.25per cent, a 16-year high where it has been pegged for the last year to fight inflation, but it has now been set at five percent, a drop of 0.25 percentage points.

Governor Andrew Bailey said the move comes after inflation pressures “eased enough that we’ve been able to cut interest rates today”.

The decision will come as joy for homeowners who have been struggling with rising mortgage payments as major banks have confirmed rates could go down as low as three per cent.

Chancellor Rachel Reeves has welcomed the move but warned “millions of families are still facing higher mortgage rates after the mini-budget”.

Key Points

• BoE cuts interest rates in major boost for mortgage holders
• Major banks reduce mortgages after Bank of England interest rate cuts
• Reeves welcomes interest rates cuts but warns families still struggling
• GPs take industrial action over budget dispute
• Braverman: Tories have ‘no chance of winning’ election

[1 August 2024 14:30 · Salma Ouaguira]

Sarwar: Scotland has opportunity to target winter fuel benefit

The Scottish Government should explore making its version of the winter fuel payment “more targeted”, the leader of Scottish Labour has said.

This week, Chancellor Rachel Reeves announced the benefit would move from being universal to being means-tested, sparking outrage north of the border about a potential £160 million funding gap.

As part of the process of devolving social security, the Scottish Government is due to take control of the benefit this winter.

Ministers have said the universality of the payment – which could be worth as much as £300 for pensioners – cannot be guaranteed.

But Scottish Labour leader Anas Sarwar said the announcement from the Chancellor presents an “opportunity” for the benefit in Scotland.

Speaking to journalists on a visit to a community project in Easterhouse, Glasgow, he said: “This is a new devolved benefit that’s going to come to Scotland this year now that the winter fuel payment is going to be devolved.

“We have an opportunity to do that in a more progressive, fair way and I think the Scottish Government should take that opportunity.

“We’re willing to work with them and representative charities to make sure those that need the payment, those that are going to genuinely be supported by that payment, receive that payment.

“I don’t see the benefit in us giving a payment to those that frankly are millionaires and don’t need the money at a time when people are struggling to make ends meet and our public finances are in a difficult situation.”

[1 August 2024 14:20 · Salma Ouaguira]

Andrew Bailey urges government to remain ‘highly alert’ to inflation signs

Bank of England governor Andrew Bailey has said policymakers will remain “highly alert” to signs that inflation might increase, despite cutting the base rate to 5% on Thursday.

Mr Bailey said the UK has “truly come a long way in returning inflation to target”, but that some indicators like persistent services price inflation remain a risk factor.

He said: “We need to watch this very carefully. The Monetary Policy Committee continues to pay close attention to services inflation as an indicator of persistence in domestic inflationary pressures, along with a range of other economic indicators.”

He added: “The committee continues to remain highly alert to the risks of inflation persistence and will decide the appropriate degree of monetary policy restrictiveness at each meeting.”

Andrew Bailey, Governor of the Bank of England (Yui Mok/PA) (PA Wire)

[1 August 2024 14:10 · Salma Ouaguira]

Labour facing fresh calls to back EU youth mobility scheme

The government has been urged to pursue a youth mobility scheme with the European Union (EU) alongside the “new approach” to legal migration launched by Yvette Cooper.

The home secretary on Tuesday launched a plan to boost the UK workforce’s skills before recruiting abroad in a bid to bring overall numbers down.

[1 August 2024 14:00 · Salma Ouaguira]

Housing market ‘set for confidence boost following base rate cut’

An autumn housing market boost is on the cards following the cut in the Bank of England’s base rate, property experts have suggested.

Homeowners on tracker mortgage rates will see their annual payments cut by more than £340 on average as a result of the base rate reduction from 5.25% to 5%.

The turning point for the base rate, after a string of previous hikes, provides a ray of light to homeowners on deals which directly track the base rate.

It will also bring some relief to those sitting on the 700,000 fixed-rate mortgage deals which are due to end in the second half of this year – equating to around 4,000 homeowners per day potentially having a rate shock when their lower-rate deal ends.

One expert described the cut as “a clear signal to the market that the Bank feels it has turned a corner in the battle against inflation”, while another said it gives “important reassurance” to borrowers who have had to contend with a volatile mortgage market in recent years.

According to industry body UK Finance, based on outstanding mortgage balances, the average tracker mortgage borrower will see their monthly payments cut by £28.44.

Someone on a standard variable rate (SVR) mortgage meanwhile will see their monthly payments fall by £14.50, assuming their lender passes on the rate cut in full. SVRs are set by lenders individually.

Major lenders are chopping their mortgage rates (PA) (PA Archive)

[1 August 2024 13:56 · Salma Ouaguira]

Reeves will have to U-turn on winter fuel savings, warns ex-minister

Chancellor Rachel Reeves has been warned that her plans to means-test winter fuel payments will not be possible because of ageing computer systems.

Former pensions minister Guy Opperman, who ran benefits for pensioners between 2017 and 2022 and looked at means-testing the winter allowance, has issued a warning that the system in the Department for Work and Pensions (DWP) cannot cope with the changes Ms Reeves has proposed.

The chancellor announced that she would save almost £3bn by ending winter fuel payments – worth between £100 and £300 – for those not on pension credit.

The decision means around 10 million out of the 11.5 million pensioners who received the payment will no longer get it.

Our political editor David Maddox has the full story:

[1 August 2024 13:36 · Salma Ouaguira]

Rishi Sunak slams government’s public sector pay increases

Former prime minister Rishi Sunak claimed that the new government’s public sector pay increases may leave the Bank with less room to cut rates further by stoking inflation.

In a post on X, formerly Twitter, he said: “The Bank of England has cut interest rates for the first time since 2020.

“That’s good news for homeowners and shows Labour inherited a strong economy.

“My concern now is that Labour’s inflation-busting public sector pay rises have put further cuts at risk.”

[1 August 2024 13:36 · Salma Ouaguira]

Reeves: Interest rate cut is a Bank of England decision

The interest rate cut was a decision made by the Bank of England, Rachel Reeves said when it was put to her the Tories’ decisions in office may have led to it.

The chancellor told broadcasters: “Decisions around interest rates are of course decisions for the independent Bank of England, but I have been left with a £22 billion black hole in the public finances.

“I am determined to close that black hole so that we can fix the foundations of our economy.

“That will require tough decisions, but that is what we were elected to do.”

[1 August 2024 13:20 · Salma Ouaguira]

Major banks reduce mortgages after Bank of England interest rate cuts

High street banks including Halifax, NatWest and Santander have slashed their mortgage rates following the BoE decision.

Governor Andrew Bailey confirmed the interest rates have now been reduced to five per cent for the first time in four years.

The move has been welcomed by mortgage holders but those on a fixed rate are excluded from the cut.

Experts claimed borrowing rates could fall to as low as 3.5 percent by end of the year.

[1 August 2024 13:11 · Salma Ouaguira]

BoE insists public sector pay rises will have no impact on inflation

Andrew Bailey has said the government’s 5.5 per cent public sector pay deal will have little impact on inflation.

Shadow chancellor Jeremy Hunt previously said the above-inflation public sector pay settlements will make further rate cuts harder.

But after holding talks with Treasury representatives at a MPC meeting, the Bank of England governor said the they will only have an impact of less than 0.1 per cent.

Mr Bailey added: “The proverbial back-of-the-envelope suggests an increment in the inflation space that is very small. I mean, you’re in quite small second decimal place numbers.”

[1 August 2024 13:04 · Salma Ouaguira]

Economists criticise Bank’s ‘late decision’ to cut interest rates

Senior economists have criticised the Bank of England decision to cut interest rates.

Experts at the Institute for Public Policy Research (IPPR) said the Bank waited “too long” to do so.

IPPR senior economist Carsten Jung said: “The Bank has been holding back the UK’s economic recovery by underappreciating the long-term effect of high interest rates.

“The UK is still 6 per cent below its pre pandemic growth path, behind the United States and the euro zone, and the Bank today confirmed that it expects growth to remain weak. 

“With inflation expectations back at pre-pandemic levels, and the labour market cooling, now is the time for the Bank to signal clearly that it will continue the lowering interest rates in the coming months.”