London CNN  —  The Bank of England cut interest rates Thursday for the first time since the start of the pandemic, providing some relief to households squeezed by the highest borrowing costs in 16 years. The decision takes the benchmark interest rate in the United Kingdom to 5% from 5.25%, where it had stood since September following the longest-running series of successive rate hikes in at least a century. The knife-edge decision saw five members of the Bank of England’s monetary policy committee vote to reduce the rate, while four wanted to keep it on hold. The rate is still the highest it has been since April 2008. UK inflation slowed to 2% in May and remained at that level in June, falling to the Bank of England’s target for the first time in nearly three years as food prices eased sharply. “The impact from past external shocks has abated and there has been some progress in moderating risks of persistence in inflation,” the Bank of England said in a statement. “Although GDP has been stronger than expected, the restrictive stance of monetary policy continues to weigh on activity in the real economy, leading to a looser labour market and bearing down on inflationary pressures.” Federal Reserve Chair Jerome Powell said a September rate cut could be "on the table" Roberto Schmidt/AFP/Getty Images Related article The Fed is about to do something it hasn’t done since the pandemic The decision to cut comes a day after the US Federal Reserve opted to hold rates steady. But Fed chair Jerome Powell told reporters that a rate cut “could be on the table in the September meeting.” The Bank of England’s first cut since March 2020 could give a big boost to sentiment in the housing market as mortgage costs fall. Major lender Nationwide unveiled a sub 4% fixed-rate mortgage last week, with others likely to follow. “Now there has been a cut, demand and transaction activity will increase when the autumn market gets underway in September and more mortgage rates fall below the 4% psychological threshold,” said Tom Bill, head of UK residential research at Knight Frank. The real estate consultancy sees UK house prices rising by 3% this year. The close decision reflects concern among some BoE policymakers that inflation hasn’t yet been completely brought under control. Inflation in the dominant services sector, at 5.7%, has proved sticky. “Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further,” the Bank of England said. —