Bank of England announces first interest rate cut since 2020
August 5th, 2024
On 1st August 2024, The Bank of England announced their first cut to the base interest rate since March 2020. In a closely debated decision, the rate has been cut from 5.25% to 5%.
What has happened to rates over the last few years?
In recent time, post pandemic supply issues, and the war in Ukraine, amongst other factors, have led to a period of high inflation, which in turn led to the Bank of England raising interest rates in an attempt to bring inflation under control.
This has resulted in borrowing rates rising to a level far above the record lows seen during the pandemic. The recent rate of 5.25% was the highest seen for 16 years. For many people looking to buy their first home, or re-mortgage, the costs have risen significantly.
Why have rates been cut now?
Inflation reached levels of up to 11.1% in October 2022 and remained high throughout 2023. With inflation now back down and holding steady at the bank’s target level of 2%, the Bank of England have decided that a small cut can now be made to the base rate.
The rates are still higher than those seen during the pandemic, but it should be remembered that these were record lows.
What does this mean for the housing market?
The rate cut is generally considered to be good news for borrowers. A cut to the base rate has a direct positive effect for borrowers with variable rate mortgages, and is likely to lead to lower fixed mortgages coming to the market over the next few months. This means less interest and lower monthly payments, albeit not at the levels seen during the recent record low rates.
All in all, the latest move should be seen as a positive for homeowners and first-time buyers as it is a step in the right direction towards lower monthly payments.
It remains to be seen what impact this has on the housing market, which has been largely stagnant over the last 12 months, but it should certainly be seen as a positive first step.
If you are thinking that the recent announcement might mean it’s a good time to move, or to buy your first home, we have lots of helpful advice available to support you on your journey. Check out our pages for buying and selling, and of course request quotes for services you will need.
