August 1: Bank Rate Pegged Down To 5% In Narrow Voting Split
The Bank of England’s Monetary Policy Committee (MPC) has voted to cut interest rates from 5.25% to 5%, marking the first cut to interest rates since March 2020, writes Jo Thornhill.
The MPC voted 5-to-4 in favour of the reduction to the benchmark Bank Rate, which had remained at a 16-year high since August last year. The four dissenting members of the Committee voted to keep the Bank Rate on hold at 5.25%.
In contrast, the vote was split 7-to-2 in favour of holding rates at the last MPC meeting in June.
Market predictions had initially expected ‘no change’ to rates today as, despite being at its 2% target, the Bank waited for inflation to settle. But yesterday’s news that the US Federal Reserve remained unchanged at its target range of 5.25% to 5.50%, with expectations of a cut in September, tipped the balance in favour of a cut for the UK.
While today’s rate cut is not expected to lead to a sustained campaign of reductions to Bank Rate, it will be welcome news to around 700,000 mortgage borrowers due to remortgage away from low fixed rates in the second half of 2024, according to UK Finance, as it’s likely to trigger reductions to remortgage rates.
However, many major lenders have already been cutting the cost of mortgage deals across the board as interest rates settled.
Borrowers paying tracker mortgage rates (which move directly in line with the Bank Rate) will…
