Relief for mortgage borrowers as interest rates are cut

Interst rates have been cut by 0.25% to 5% by the Bank of England today bringing relief to millions of mortgage borrowers and businesses. 

Joe Nellis, MHA’s Economic Advisor, comments on the cut to interest rates by Bank of England;

The cut in interest rates today follows months of expectation and the unwillingness of the Bank of England so far to follow their counterparts at the ECB to alter the cost of borrowing in their markets.

Although the figures for core inflation and service sector inflation remain higher than the historical average, a majority on the Monetary Policy Committee clearly felt that the inflation dragon has been tamed and now was the time to act boldly and cut rates.

Not only will this news be welcomed by mortgage borrowers but will be warmly greeted by the new UK government as they embark on their pursuit of growth and the revitalisation of the economy, particularly in light of the recent IMF warning that the UK economy will need to grow at three times the current rate to ensure that Labour can fulfil both its spending commitments and its promise to not raise taxes.

We think another cut will follow – probably in December – with a rapidly improving economic picture which will be a welcome relief for borrowers in the lead up to Christmas, although the Bank of England looks to rebuild its credibility by not taking its foot off the brake too quickly, having been criticised for being too slow to raise interest rates in 2022 as inflation took off.”