The Bank of England has made its first interest rate cut in more than four years, from 5.25% to 5%. While some fixed-rate mortgage holders will face future increases in mortgage payments, variable rate mortgages will see an immediate decrease in their monthly mortgage payments. People should not expect to see a significant fall in borrowing costs in the months to come, according to Governor of the Bank of England, Andrew Bailey. The bank is committed to ensuring low inflation and will be careful not to cut interest rates too quickly.
Rupali Wagh, co-owner of Tukka Tuk street food in Cardiff Market, is a vocal promoter of the rate cut. Wagh believes it is good for business as customers will have more disposable income. The days of unrestricted spending appear to be over; Wagh says that, due to rising living costs, many customers are more interested in discussing mortgages and expenses than food. The Bank of England is also signalling that fixed-rate mortgage holders will continue to face increasing mortgage rates over a period of time.
Despite the cut in interest rates, the Bank of England remains cautious and warns that there will not be a rapid decline in borrowing costs. Commenting on the decision, Governor Bailey emphasised that inflationary pressures must be managed. The bank remains committed to monitoring wage growth, which can have an impact on inflation.
Labour Chancellor Rachel Reeves welcomed the interest rate cut but blamed former Prime Minister Liz Truss for raising mortgage rates in her mini-budget. Reeves has confirmed wage increases of between 5% and 6% for NHS workers and teachers. The Bank of England was briefed by the Treasury about the figures earlier this week. The bank’s Monetary Policy Report, which sets out growth forecasts for the UK economy, did not include the impact of Reeves’ announcement.
Although the bank has a more positive outlook for the UK’s economic growth in the second quarter of 2022, the UK is still experiencing weaker momentum in its businesses
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