Incremental cuts likely over two to three years with rates expected to stay well above pre-Covid levels of 0.75%
Borrowers will breathe a collective sigh of relief. The Bank of England has cut interest rates from 5.25% to 5% and in response the major lenders have already begun to shave their best buy mortgage offers.
Those wanting to get on the housing ladder will find property slightly more affordable after the cut, which ends a year of ultra high borrowing costs and is the first rate cut in more than four years.
Small businesses that took out loans to survive the pandemic and the spike in energy costs in 2022 will also be cheered by the move, especially as they tend to re-finance their loans more frequently than homeowners and can benefit more immediately.
The interest rate cut followed a fall in inflation to 2% that the Bank’s monetary policy committee (MPC) said reflected a broad slowing of prices growth.
The high level of interest rates was also seen as dampening economic growth a bit too much next year, leading the committee to believe the economy needed slightly lower borrowing costs to prevent it from slipping backwards towards stagnation.
