The Bank of England has cut interest rates today from five per cent to 4.75 per cent, marking the second reduction this year.
The move follows August’s previous cut from 5.25 per cent to five per cent, which was the first decrease in more than four years.
The rate cut comes as UK inflation dropped unexpectedly to 1.7 per cent in September, its lowest level in three-and-a-half years and below the Government’s two per cent target.
This decline in inflation, coupled with wage growth slowing to its lowest pace in more than two years, has strengthened the case for reducing borrowing costs.
Andrew Bailey, bank Governor had previously indicated that the Bank could be “a bit more aggressive” at cutting borrowing costs, depending on inflation rates.
Savers are urged to take advantage of high interest rates whilst they last
GETTY
Most analysts had predicted the 0.25 percentage point reduction, reassuring homeowners that this change would make borrowing cheaper for households.
Homeowners with tracker mortgages could see significant savings from today’s expected rate cut, with monthly payments potentially dropping by £32, or £384 annually.
When combined with August’s previous rate reduction, tracker mortgage holders could benefit from total savings of £63 per month, amounting to £756 per year.
LATEST DEVELOPMENTS:
Around 4,000 customers face their existing cheap rate deals ending each day, leaving them to choose between new fixed-rate offers, tracker mortgages, or their lender’s Standard Variable Rate – which can reach almost nine per cent.
Andrew Hagger, personal finance expert at Moneycomms.co.uk said: “Mortgage customers are overdue a bit of good news, and a rate cut will help them feel more positive about their finances as they head into 2025.
“Consumers are still finding it challenging to balance their household budgets, so a second cut in interest rates in four months should help people feel less anxious about their finances.”
He noted that while fixed-rate mortgage holders won’t see immediate benefits, it “should make a worthwhile difference” when they review their deals.
Although welcome relief for homeowners, savers are likely to see reduced returns following the rate cut.
Rachel Springall, of financial information company Moneyfacts, warned: “Savers are the ones who feel the force of cuts to interest rates. Those savers who use their interest to supplement their income will feel overlooked if rates plummet.”
Experts advise savers to shop around for the best deals, noting that loyalty to older accounts often results in lower interest rates.