The Bank of England has announced its first cut to the base rate of interest for over four years, cutting it from 5.25% to 5%.
After rates hitting a 16-year high, the move brings some relief to borrowers – particular those on tracker and variable rate mortgages, and those about to enter a new fixed rate deal on their home loan.
Expectations on financial markets has shown about a 65% chance of the Bank’s policymakers opting to reduce rates on Thursday.
The UK’s base rate has been held at 5.25% since August last year, the highest level since 2008.
It comes after new economic data suggested the UK’s cost-of-living crisis has eased in recent months thanks to inflation coming off the boil.
Consumer Prices Index (CPI) inflation hit 2% in May and June, which is the central bank’s target level, indicating that price rises have been brought under control.
Economists stressed that other key indicators of inflationary pressure – mainly services inflation and wage rises – have remained a concern for policymakers.
Chancellor Rachel Reeves has welcomed the bank rate cut.
“While today’s cut in interest rates will be welcome news, millions of families are still facing higher mortgage rates after the mini-budget,” Chancellor Rachel Reeves said.
“That is why this government is taking the difficult decisions now to fix the foundations of our economy after years of low growth, so we can rebuild Britain and make every part of our country better off,” she adds.
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