The Bank of England (BoE) have today announced their base rate is to be cut 25 basis points, leaving the Bank Rate - what we might simply call the interest rate - at 4.5 per cent, the lowest it has been in the UK since mid-June 2023.
Around that time, with inflation rising fast and the BoE seeking to stem it, the base rate jumped from 3.5 per cent at the start of February to 5.25 per cent by August - causing a sharp increase in mortgage repayments, a battle for savers among banks and plenty of other side effects.
UK economic growth has been forecast at around one per cent for 2025, which is lower than previously expected and perhaps even showing stagnating growth, so an interest rate cut is seen as one way to stimulate spending and give the economy a kickstart.
Secondly, the base rate isn’t the rate you are necessarily charged by your bank or lender for the mortgage - they’ll base theirs off the BoE rate but it doesn’t have to be the same.
Broadly speaking, as increasing interest rates have meant mortgage repayments going up, then the reverse should also hold true: lower rates, lower repayments.
