Bank drops base rate to 5%, a first cut in over four years

Homeowners should not expect borrowing costs to drop rapidly in the coming months, the governor of the Bank of England warned yesterday, after interest rates were cut for the first time since 2020.

- ALBERT TOTH

The central bank reduced the base rate from 5.25 per cent to 5 per cent after a narrow vote among policymakers. It means pressure will be eased for some homeowners who will see their mortgage costs come down, but it could prompt banks to start reducing savings rates.

Mr Bailey said the decision was possible because inflationary pressures “have eased enough” to allow a cut. “But we need to make sure inflation stays low, and be careful not to cut interest rates too quickly or by too much,” he added. His comments suggest rates are likely to fall more gradually than they have risen in recent years.