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Bank of England Cuts Interest Rates to 5% in First Drop Since 2020

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    Base Rate Finally Slashed From 16-Year High

    The Bank of England has voted to cut the Base Rate to 5%. This is the first cut since March 2020 and it has been highly anticipated.

    The Bank of England’s Base Rate heavily influences the rates set by banks and money lenders, so a cut can potentially have a significant effect on buy-to-let costs. The interest rate had been set to its highest rate in sixteen years in August 2023 – 5.25% – where it had been held since then. The rates were raised to try to rein in inflation, and in June this year, inflation had reduced to the Bank’s 2% target, which is likely to have been a factor in the decision.

    According to the BBC, this could mean a near-immediate change to the personal finances of some people, such as mortgage holders.

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      The Bank Voted Narrowly in Favour of Cutting Rates

      It was a narrow vote from the Monetary Policy Committee in favour of the cut, with 5 members voting to cut rates and 4 voting to hold.

      According to the BBC, this cut will be seen as an important step as the economy starts to turn the corner after years of inflationary shocks. They say there may also be scope for a further Base Rate cut later in the year, perhaps in November.

      Andrew Bailey, Bank of England Governor, stated: “We need to put the period of high inflation firmly behind us. We need to be careful not to cut rates too much or too quickly”.

      The Bank of England’s committee will meet next on 19th September.

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      What Does This Mean for the Future Property Market?

      Many property forecasters have predicted that a base rate cut in August will lead to a market boom in the autumn. The first half of the year has seen a better-than-expected market performance, and the cut is likely to boost this further. For this reason, many investors were waiting for the first cut before getting into property investment.

      According to Rightmove, they observed signs in market activity that suggested some potential buyers were waiting for the first Base Rate cut before implementing their plans.

      Tim Bannister, Rightmove property expert, said: “A first Base Rate cut for over four years, together with the new political certainty, could set the scene for a positive Autumn market, with improved affordability and a more confident outlook in the second half of the year.”

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      Author

      Jessica Ferris

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      Jessica Ferris is a property writer at RWinvest, helping our readers stay ahead of property market trends with the latest news and statistics.

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        Business & Economy, Market & Investment Trends, UK