The Bank of England has lowered interest rates for the third consecutive time, bringing the base rate down to 4.5%. This decision aims to stimulate economic growth while managing inflation. The move will impact borrowers and savers differently, with mortgage holders potentially seeing lower repayments and savers potentially facing reduced returns.
The Bank of England has cut interest rates for the third consecutive time, bringing the base rate down to 4.5%. This decision reflects the Bank's assessment that the economy is healthy enough to withstand another reduction. The move comes after a period of aggressive interest rate increases in the wake of the Covid-19 pandemic, with the Bank raising rates 14 times in an effort to curb inflation. These increases caused concern for homeowners facing rising mortgage payments.
The latest rate cut will result in lower monthly repayments for those with tracker mortgages, which are directly tied to the Bank's base rate. Standard variable rate (SVR) mortgages may also see reductions, as lenders often adjust their rates in line with the base rate. However, fixed-rate mortgage holders will not benefit from this change, as their payments are locked in for a predetermined period.For those considering remortgaging, the outlook is less favorable. New fixed rates are likely to be higher than previous ones due to the persistent elevated base rate, which remains at its fourth-highest level in the past 15 years.While the rate cut offers relief for borrowers, savers may experience a decline in returns as banks adjust their savings rates accordingly. Experts recommend that savers reassess their options and explore alternative investment strategies.The current interest rate reduction follows a trend of gradual easing since the peak of 5.25% in autumn 2023. The Bank of England's Monetary Policy Committee is closely monitoring economic indicators and will continue to adjust rates as needed to maintain price stability and support economic growth
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