The Bank of England has cut benchmark rates by 0.25 basis points (bps) to 4.75%. The move was largely expected by markets.
The Bank shared that its Monetary Policy Committee (MPC) voted 8–1 to reduce the rates, with one member voting to hold the rate at 5%.
Inflation has decreased – currently at 1.7% in September versus the 2% target. At the same time, there is an expectation that inflation will rise to 2.5% by the end of the year.
The MPC said there remains “significant uncertainty” regarding the outlook for the labour market.
The impact of the new Budget on inflation, recently revealed at the Autumn Statement, may change due to the degree and speed with higher costs funnel in to pricing, profit margins, wages and employment.
CI received several comments on the Bank Rate change.
Douglas Grant, Group CEO of Manx Financial Group, said the decision to lower interest rates to their lowest level since June aligns with positive news that UK inflation has fallen. This policy chanbe, along with the Autumn Budget fiscal plans, provides a potential boost for UK investments.
“However, high input costs and possible inflationary pressures from the Chancellor’s measures mean that businesses must adapt their lending strategies to stay resilient in a still uncertain market,” said Grant. “Recent research from Manx Financial Group shows that nearly a third of UK SMEs have paused or reduced operations due to financial constraints—an improvement from 40% in 2023 but still significant, with around 10% of SMEs struggling to access external finance. Given SMEs’ role in driving growth, employment, and innovation, the Labour Government must foster a supportive lending environment for their resilience and expansion. Both traditional and alternative lenders are key to this, as inadequate financing could hinder recovery amid rising taxes, geopolitical tensions, and cost-of-living pressures.”
Michael McGowan, Managing Director, Foreign Exchange, Bibby Financial Services, also welcomed the rate cut but cautioned firms to plan for different outcomes due to global turmoil which “make for a still uncertain economic outlook.”
UK Managing Director of Ohpen, Jerry Mulle, said a declining rate is good news for homebuyers as mortgage rates should move lower too.
“Last week’s Autumn Budget announced a £70 billion increase in spending which will have forced the BoE to take caution. In real terms, the Budget will also put added pressure on households and those already making mortgage payments, or planning to apply for a mortgage, as fixed mortgage rates are expected to remain high. Further, after Republican Donald Trump’s win, the UK economy will be bracing for the impacts resulting from increased US protectionism, which will see higher import tariffs and lower immigration policies, increasing US inflation and putting pressure on UK return on investment. ”
Mulle predicted that in the coming months, home buyers may experience increased stress. Their research into the current state of mortgage applications reveals that a third (32 %) of UK consumers found rising interest rates the most stressful part of the mortgage application process, rising to two-fifths (41%) of Gen Y.
“In extraordinary times like these, the mortgage industry must make the mortgage application process more transparent and inclusive from the outset, to reduce stress in the process where possible. With a joined-up approach, the industry can simplify the application process by taking complex legacy technology out of the equation and enable better real-time data sharing between all the stakeholders involved in the home-buying journey.”
The next MPC meeting is scheduled for December 19th.
