Bank of England's latest move creates unexpected twist for UK homeowners
Bank of England makes second interest-rate cut of 2024‚ moving to 4.75%. Markets show mixed reactions as mortgage-holders face surprising rate changes despite the central banks decision
The Bank of Englandʼs monetary-policy makers voted 8-1 to lower interest rates today (its the second cut since Aug-24)‚ bringing the rate down to 4.75%. Andrew Bailey‚ the Bankʼs governor hinted at future changes but the road ahead seems less clear-cut
Back in late-21‚ rates hit a bottom of 0.1%; since then weʼve seen big swings — reaching 5.25% last summer before the first cut happened in Aug-24. These changes affect both sides of the money game: two-year fixed mortgages now sit at 5.42% (compared to 2.34% about 3 years ago)‚ while savings accounts offer around 5% interest
The reasons behind these rate moves are pretty straight-forward — inflation jumped to 11.1% during fall-22 due to:
- Ukraine conflict impact on food and energy
- Post-covid demand surge
- Worker shortages
- Supply chain problems
The Banks strategy worked though; inflation dropped to 1.7% by early fall. However dont expect quick changes ahead; recent events (like Labourʼs Budget and Trumps win) might slow down future cuts. Nicholas Mendes from John Charcol points out: “weʼre looking at a more careful quarterly approach for future cuts“
For home-buyers its a bit tricky — fixed rates have been going up lately despite the rate cut. David Hollingworth from L&C Mortgages explains that market uncertainty is pushing lenders to adjust their rates; making things less predictable for borrowers
