August 1st, 2024
A welcome piece of news arrived today as the Bank of England (BofE) has reduced the base rate from 5.25% to 5%. This drop aligns with the latest data showing that inflation remained at 2% in June, and continuing to meet the BofE’s target.
This alongside a change in UK leadership, provides excitement for the rest of the year in terms of people’s homeownership possibilities.
The reduction in the base rate is the first since August 2023. This pivotal change is anticipated to alleviate some financial pressures, especially for borrowers, and is expected to invigorate a sluggish housing market.
This announcement comes just after major lender Nationwide announced a sub-4% product, which came as welcome news alongside the less favourable rates offered by lenders over the past two years. This base rate cut could be a sign of other lenders starting to follow suit in the coming months,
major lenders had adjusted their rates upwards due to prolonged high inflation expectations. However, this rate cut could prompt a reassessment of those increases. With inflation now under control and the base rate lowered, these rates might see a significant downward adjustment.
Jennifer Ward of CMME expressed her thoughts on the situation:
“The BofE’s decision to lower the base rate to 5% is a welcome relief for many borrowers. This move signals a step towards easing financial pressures, but it’s crucial to remain cautious as market conditions continue to evolve.”
The confluence of a base rate cut and controlled inflation has the potential to spur economic activity by encouraging spending and investment, giving a boost to various economic sectors as the nation prepares for a change in government.
Looking ahead to further announcements from the Bank of England, the focus will now be on how this dual achievement of a rate cut and target inflation impacts the broader economy and whether any additional monetary adjustments will be needed.
Time will only tell if this downward trend will continue as we await the next base rate announcement on 19th September.
CMME remains committed to guiding you through these evolving economic conditions. To explore what this significant base rate cut means for your mortgage options, book a FREE no-obligation call with our experts today.