The base rate cut, from 5.25% to 5%, is the first in over four years and is expected to ease the burden on businesses with outstanding loans as well.


The Bank of England's Monetary Policy Committee (MPC) decided on the cut by a narrow vote of five to four, lowering the rate from a 16-year high. This change will reduce monthly payments for those on tracker mortgages and offer lower rates for new fixed-rate home loans.


This decision comes after a gradual decline in inflation to 2%, down from a peak of 11.1% in October 2022, which had been driven up by the impact of the Russian invasion of Ukraine.


Anthony Reavey, a mortgage and protection adviser at Reavey Financial Services in Newry, noted that this development would bring relief to customers and expressed hope for further rate reductions. However, he cautioned against expecting a return to the extremely low interest rates seen in 2020 and 2021.


Reavey remarked, “We’ve been anticipating a rate drop since the beginning of 2024, and while it has felt like a long time coming, it’s positive that it has finally happened. While a return to the lows of the past is unlikely, there’s potential for further significant reductions over the next year.”


The UK's base rate had been stable at 5.25% since August of the previous year, its highest point since 2008. Michael McCord, a lecturer in property market research at Ulster University, predicted that borrowing costs among lenders could decrease by up to 30 basis points for the remainder of the year, potentially lowering a 5% mortgage rate to around 4.7%. However, he noted that the benefits for consumers would take time to materialize, and he did not anticipate another rate reduction this year, citing cautious signals from the BoE. He expected the base rate to gradually settle around 4.5% by the end of next year.


Suzanne Wylie, chief executive at NI Chamber, stated that businesses would appreciate the rate cut, as the cost of borrowing had been a growing concern. She highlighted that while lower interest rates could reduce business costs and stimulate growth, particularly in high-growth sectors, businesses still face various challenges. Wylie emphasized the need for additional measures to support growth, such as ensuring dual market access and addressing disparities in corporation tax rates between the UK and the Republic of Ireland.