Interest rates live: Bank of England cuts rate in boost to homeowners

Trade union Unite called the Bank of England’s interest rate cut “long overdue” on Thursday.

Unite general secretary Sharon Graham said: “This cut to interest rates is necessary and long overdue.

“However, we will need more serious action to reverse over a decade of falling living standards for workers and communities.

“This must include a joined-up industrial strategy to tackle energy profiteering, rebuild our industrial base and boost the economy.”

Bank of England governor Andrew Bailey welcomed the expected announcement of a UK-US trade deal later on Thursday afternoon.

He said: “We haven’t been briefed, but we do have news to suggest that there will be an agreement and we welcome this news. It will help to reduce uncertainty.

“The UK is, though, a very open economy and is affected by the tariffs affecting other economies.

“I say that because I hope the UK agreement, if it is the case this afternoon, is the first of many.

“It is excellent that the UK is leading the way and I do congratulate all those involved.”

The Institute of Chartered Accountants in England and Wales (ICAEW) said the Bank of England’s Thursday rate cut is a “timely shot in the arm” for firms.

Suren Thiru, ICAEW economics director, said: “This cut in interest rates is a timely shot in the arm for those businesses struggling to adjust to last month’s substantial spike in business costs and households contending with burdensome mortgage costs.

“While this reduction confirms that UK interest rates are trending downwards, it won’t materially reverse the financial squeeze or slide in sentiment among households and firms, given that many other costs are rising, and global headwinds are still elevated.”

He added: “With inflation expected to be slightly more subdued and concerns over turbulence in the global economy likely to persist, even with a US-UK deal on trade, the case for accelerating the pace of interest rate cuts may still increase.”

Shadow chancellor Sir Mel Stride said interest rates remained high, blaming Labour for “economic mismanagement”.

Interest rates have fallen under Labour but Sir Mel hit out at Rachel Reeves’ policies, suggesting they had prevented more aggressive cuts.

“While we welcome this decision, which will provide some relief to families enduring ever-rising taxes under this Labour Government, interest rates remain high,” Sir Mel said.

“Labour’s economic mismanagement is keeping interest rates higher for longer, pushing up bills and subjecting working people to tax hikes, leaving families £3,500 worse off.

“Labour must put working people first and change course now.”

London’s FTSE 100 Index held onto gains following the rate cut decision while the pound strengthened slightly.

The FTSE 100 stood 30 points higher at 8589.3, up 0.4 per cent, after rates were cut to 4.25 per cent from 4.5 per cent.

Sterling edged 0.3 per cent higher to 1.3331 US dollars and was 0.2 per cent up at 1.1770 euros.

Chancellor Rachel Reeves has welcomed the interest rate cut but acknowledged families are still facing a cost-of-living squeeze.

She said: “This interest rate cut is welcome news, and the fourth since we came into government making it cheaper for businesses to borrow, reducing the cost of a new mortgage, making homeownership more accessible, car finance more affordable and easing the pressure on those paying off personal loans.

“But there is more to do, and I know families are still facing cost-of-living pressures.

“In a changing world we’re bringing stability to the public finances and going further and faster to grow the economy, putting more money in the pockets of working people through our plan for change.”

The Bank of England has confirmed a 25 basis points cut to the Bank Rate down to 4.25 per cent, a second such drop this year in an ongoing boost to businesses and mortgage payers alike.

Following cuts in February and now May, the base rate is down from a high of 5.25 per cent to a level last seen two years ago in May 2023.

While the Monetary Policy Committee (MPC) had been widely expected to bring interest rate down this time, there is a wider possibility for back-to-back rate cuts – while some analysts predict a further three cuts to happen this year, bringing the interest rate down below four per cent for the first time since January 2023.

Here’s the full story from The Independent’s business and money editor Karl Matchett:

The Bank of England has slashed interest rates to 4.25 per cent in a boost to mortgage-holders, following a split vote among policymakers.

The Bank’s nine-person Monetary Policy Committee (MPC) voted by a majority of five-four to reduce rates by 0.25 percentage points, bringing it down to the lowest level since May 2023.

Two members of the MPC, Swati Dhingra and Alan Taylor, wanted to push through a bigger 0.5 percentage point reduction to interest rates.

Another two members, Catherine L Mann and Huw Pill, preferred to keep rates unchanged at 4.5 per cent.

The committee stressed that it remains “sensitive to heightened unpredictability in the economic environment” and that a “gradual and careful approach” to cutting rates was appropriate.

The Bank of England is set to announce its interest rates decision in 10 minutes.

The Bank’s nine-strong monetary policy committee is set to slash its base rate in a boost to mortgage-holders, as the UK’s economic growth outlook worsens in response to Donald Trump’s global trade war.

Unusually the announcement will be made at 12.02pm not midday, to allow for the two minutes silence being held to mark the 80th anniversary of VE Day.