Credit, Collections & Insolvency News
The Bank of England’s Monetary Policy Committee (MPC) has voted to reduce the base rate from 4.25% to 4%. The MPC voted 5 to 4 in favour of the move, with the dissenting members preferring to leave rates unchanged at 4.25%.
Commenting on the change, Ryan McGrath, Director of Second Charge Mortgages at Pepper Money, said “Interest rates have fallen to their lowest level in over two years, providing immediate relief for customers on tracker products who will see reduced monthly payments. This improved rate environment makes second charge mortgages increasingly attractive, particularly for homeowners locked into favourable primary mortgage rates who need additional funding without disrupting their existing arrangements.
“While today’s modest rate cut signals measured caution rather than a fundamental shift, it creates opportunities for those whose circumstances fall outside traditional lending criteria. With property transactions remaining subdued and economic pressures mounting, including falling payroll numbers and rising unemployment, secured loans offer a vital lifeline, allowing homeowners to unlock equity to for necessary home improvements or to consolidate high-interest debt into a single, manageable payment at typically lower rates.”
John Phillips, CEO of Just Mortgages and Spicerhaart, said “It’s great to see the central bank putting the economy ahead of inflation when making today’s decision. While inflation has risen and is nearly double target, it importantly remains well within the bank’s broader forecast, which has long predicted a peak in Q3 before beginning to come back down. With a hold last month, the bank doesn’t have to stray too far from its gradual approach and critically gives the UK economy the adrenaline shot it so desperately needs.
“There’s no doubt that many lenders will have already factored this into their pricing, but it remains a powerful piece of good news for brokers to be sharing with potential clients. Lenders have been staying competitive, all while continuing to innovate and seize opportunities to increase access and improve affordability. While we’ve certainly seen some bold rate predictions for the rest of the year and beyond – with some predictions of three more cuts – I’m hopeful this isn’t the last one we’ll see this year as inflation hopefully turns a corner and the central bank prioritises the health of the economy.”
Guy Anker, Money Expert at Compare the Market, said”Today’s decision by the Bank of England to cut interest rates could provide some welcome relief for many homeowners and prospective buyers. With mortgage rates having risen sharply over the past two years, today’s move could help ease some of the pressure on borrowers – especially those on variable-rate or tracker deals, and those coming to the end of a fixed term or tracker deal, who are looking into future repayment options.
“However, lenders may pass on rate cuts at different speeds, and not all mortgage products will become cheaper overnight, making it crucial for consumers to compare deals carefully. Whether you’re remortgaging, buying your first home, or just looking to reduce monthly payments, shopping around online could help you find which competitive rates are available to you.”
Charles Resnick, Chief Finance Officer at Afin Bank said “The markets have been predicting a base rate cut since the last announcement back in June, so today’s 25bps drop to 4% is no surprise. But the MPC’s minutes and voting breakdown will be more illuminating as they will show how much of a split there is in the committee and give a hint at the future direction of base rate travel.
“At 3.6%, inflation is still way above the Bank of England’s 2% target, while signs of economic growth are thin on the ground. The country, and the markets, are holding their breath to see what Chancellor Rachel Reeves announces in her Autumn Budget later in the year and whether this would likely lead to further base rate cuts towards the end of the year and into 2026.”
Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown said “Bank of England policymakers are still playing a highly cautious hand. Although the Bank has opted for a cut, the chances of another reduction by the end of the year have receded sharply. The Monetary Policy Committee is split five to four between cut and hold, so it’s pointing to a very prudent approach ahead. The FTSE 100 has fallen further into the red, as high borrowing costs look set to linger.
“Amid trade turmoil, wary business sentiment and rising unemployment, the UK economy is going in the wrong direction, and the Bank of England wants to give it a chance to get back on track. President Trump’s playing an unpredictable game of trade chess, high on tactical moves, and it’s still unclear where all the pieces will land. While the UK appears to have shifted into a more resilient position, with slightly less onerous tariffs than other nations, it won’t be immune to the fallout from the global economy.
“But in the background, the kettle of rising prices is still whistling. Inflation remains unhelpfully high and is expected to hit peak obstinacy of 4% in September – double the bank’s target. Consumers are continuing to show resilience in spending patterns in parts of the economy, and the worry will be that employers will keep paying inflation-busting wages, which could fuel prices further. So even though we’ve had a cut today, borrowers will need to find big reserves of patience and may have to wait until next year to see costs fall back significantly.
“It means the boost to growth Chancellor Rachel Reeves needs to help bolster the public finances and ease the squeeze on spending looks set to stay elusive, which is why tax rises in the Budget look set to be on the cards.’’