Bank of England makes interest rate decision

It was described as a decision that was on a “knife-edge” – but the Bank of England has, moments ago, revealed its base rate decision for its latest cycle.

The central bank announced a rate cut from 5.25% to 5.00% - a 0.25% decrease.

Did the Bank of England rate move match analysts’ expectations?

Traders had leaned towards a 0.25% rate decrease – with 60% expecting that outcome, while the remainder believed that a hold was likely.

Among the issues highlighted was that borrowing costs currently sit at their highest levels in 16 years, which has heaped pressure on household finances – although on the flipside, this does mean that savings returns have been higher.

Back at the June announcement, the Bank of England seemingly left the door open for a rate cut – indicating that the majority of decision makers could vote that way. This was given greater credence by inflation easing over recent months – hitting 2% in the year to June, which meant it was at the Bank of England’s target.

Still, today’s decision was described by Hargreaves Lansdown’s head of money and markets Susannah Streeter as being on a “knife-edge” ahead of time. She described the chances of a rate cut at 60/40 but noted it had been at 50/50 just weeks earlier. “If they leave it too late, it could be a more difficult September,” she said ahead of the announcement.

It is expected that further rate cuts will be slow and steady with policymakers still hoping to encourage people to reduce their spending in order to cut demand for goods and bring price rises into check. However, waiting too long could stifle the economy and lead to a hold off in investments and employment.

What impact would a rate change have on mortgage payments?

Ahead of the announcement, UK finance released the following table outlining the potential impact of a Bank of England rate change on a standard mortgage:

Do you have any thoughts on the Bank of England’s decision? Leave a comment below.