First UK interest rate cut for four years

The Bank of England has cut interest rates for the first time since the start of the pandemic in 2020. A “finely balanced” decision to drop the price of borrowing to 5 from 5.25 per cent has been described as a “hawkish” cut by economists, given the range of scenarios that could see inflation tick up again. But there’s still cause for rejoicing, not least from Rachel Reeves, who used to work at the BofE and has made kick-starting growth a key promise of her first term as chancellor. Mortgage-holders and first-time buyers may also breathe a sigh of relief as some deals with large deposits begin to drop below 4 per cent, but the uncomfortable truth for most of the 1.5 million people who need to remortgage this year is that costs will rise because of how cheap a loan was two years ago. Currently, the average two-year fixed rate is 5.77 per cent and the five-year fix is 5.38 per cent. Will they drop further? Andrew Bailey, the governor of the BofE, wasn’t giving anything away and declined to comment “on the path of rates to come”. Roughly half of traders are expecting another two rate cuts this year.