On 7 November, the Bank of England cut the base rate – which influences the wider cost of borrowing for businesses, individuals and the government – from 5% to 4.75%.
This had been widely expected, so the markets had already factored the cut into their calculations. In other words, it was so widely anticipated that borrowing costs had already been adjusted accordingly.
However, the Bank of England also said that future interest rate cuts may not come as often and as quickly as previously thought.
In the words of one mortgage broker, that was because the Budget delivered by Chancellor Rachel Reeves “threw a spanner in the works”. Spending pledges risked inflating some prices, something high interest rates are designed to control.
Bank governor Andrew Bailey said rates were likely to “continue to fall gradually from here”, but cautioned they could not be cut “too quickly or by too much”.
Lenders price their mortgages not only on where interest rates are at any one time but where they, and the financial markets, expect them to be in the future.
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