Borrowing costs are unlikely to decline sharply in several months, the Bank of England Governor said on Thursday, after the key rates were cut for the first time in 2020.

To recap, the central bank cut the base rate from 5. From 25 per cent to 5 per cent following a tight vote among the policymakers.It means that some homeowners will no longer endure the pressure of having a high mortgage price while on the other side, it may lead to banks cutting down the savings rates.

This is according to the Governor of the Bank of England, Mr Bailey who says that this is possible because; “inflationary pressures have eased enough as to permit a cut.”“But we need to make sure that prices do not increase and we also need to avoid slashing interest rates with high frequency or depth,” he noted.

It gives an impression that the rates are expected to continue falling but not as sharply as they have been increasing in the past years.Most economists expect the rates to remain stable the next time the committee meets in September; however, a rate cut may be observed in November.The former Prime Minister Rishi Sunak said that such a raise in the remuneration for the public sectors which includes the NHS may add more pressure on the overall inflation rate.
“My worry now is that further Labour means more cuts because inflation-slashing public sector pay rises sound the final alert,” he stated.

Bank was informed about the pay rises and as per their expectations, it should not fuel inflation in a big way.
The Chancellor Rachel Reeves said homeowners will welcome the cut in interest rates, though she was quick to point out: “But millions of people are still paying higher mortgage rates due to the Liz Truss 2022 mini-budget.”

Thursday’s base rate decision is good news because those people with tracker mortgages will see their repayments reduced by an average of over £340 annually.Another almost 700,000 of these possess fixed-rate mortgages expiring in the second half of 2010 and could potentially lock into lower rates.

This is the first time that UK rates are being cut since the outbreak of Covid-19 in March last year.
However, it will still take a long time to arrive at other distinct ranges that was between 2008 – 2021. During this time it was never increased above 0. 75 per cent, and even sat at 0 sometimes during the day. 1 for several months up to the last quarter of the year 2021.

Indeed, mortgage rates have gone up along with the escalated interest rates, meaning homeowners are paying much more. Around 1. Some 6m homeowners are expected to come to the end of a fixed-rate deal this year, and be faced with increases of around £1,800 on their repayments on average, the Resolution Foundation said.
Senior economist at the IPPR think tank, Carsten Jung, said: “I agree with the Bank of England decision to cut today’s interest rates, although it was long overdue. ”

“The Bank of England has been throttling the country’s recovery by underestimating the impact of high interest rates over the long-term. The UK is now 6% below on per-pre-Covid trajectory of growth compared to the US or the Eurozone and by its own admission, the BoE knows that growth will remain weak in the UK.”

“Hence, with the inflation expectations back at pre-pandemic levels to sustain itself and the labour market gradually cooling, it is about time for the Bank to start signalling even more the downward trend of its interest rate in the next few months.”