The Bank of England has reduced its base interest rate from 4.25% to 4%, marking the fifth cut in a year and returning rates to levels last seen in March 2023. The move is expected to provide an immediate boost to homeowners with tracker mortgages, who will see their monthly payments drop.
However, savers are likely to be hit as banks pass on the lower rate to deposit accounts. Many fixed-rate savings products and easy-access accounts may see reduced returns, though some institutions may delay changes to retain customers.
Mortgage lenders have already begun cutting rates on new fixed deals in anticipation of further base rate reductions. The average two-year fixed mortgage rate fell below 4.5% for the first time in over a year, making home loans more affordable for buyers and those remortgaging.
Analysts caution that the impact on the housing market may be modest, as affordability pressures persist and house prices remain elevated. The base rate cuts signal a shift in monetary policy aimed at stimulating economic growth, but conflicts over wage rises could complicate the outlook.
