The Bank of England’s Monetary Policy Committee has opted to slash the base rate by 0.25%, which brings it down to 4.5%.
Marking the lowest point since June 2023, many are left questioning what this means for the typical household.
Amelia Murray, from Be Clever With Your Cash, pointed out that the news isn’t great for savers: “Savings rates have been falling in recent months and we’re expecting many easy-access accounts, which are usually variable rate, to take a further tumble following today’s announcement.”
Interestingly, there appears to be a silver lining with Cash ISAs that Amelia highlighted: “We often see competition heat up in the ISA market as the end of the tax year approaches so it’s worth keeping an eye on the top ISA rates.”
While a lower base rate often leads to reduced interest rates, making life easier for borrowers but harder for those with cash savings. However, credit card and loan holders shouldn’t count their blessings just yet.
Amelia continued: “Loans and credit cards may not get much cheaper, but it’s still a good idea to compare deals to find the best rate. More rate cuts could happen in the future, but nothing is guaranteed, so staying informed and shopping around for the best options is always your best bet.”
Mortgage holders might feel the relief from the cut, as they’re set to see a dip in their repayments and interest rates, albeit the exact savings would vary based on their lender. Amelia added: “We’ve already seen Santander announce it’s passing on the rate cut to tracker and SVR mortgage customers from 3 March. If you’re on a fixed-rate deal, nothing will change for you during your fixed term.”
Prospective homebuyers have reasons to be cheerful too, according to Kevin Roberts, Managing Director at Legal & General Mortgage Services, who remarked: “Today’s base rate decision will be encouraging news for homebuyers, and some lenders have already priced this change into their mortgage rates over the past few days.”
“To take advantage of these opportunities, it is important for buyers to speak with an adviser to get the best possible deal. This gives people the best chance of navigating changing rates and landing a product that fits their needs.”
Contrastingly, Alistair Douglas, CEO of TotallyMoney, offers a less optimistic perspective of the rate modification’s impact, asserting: “A 0.25% cut is unlikely to make a real material difference on people’s finances. Most mortgage lenders will have already factored this into their pricing, while some banks have already started reducing savings rates.
“Energy, water, phone, and broadband bills continue to rise, while Council tax in some areas will see a 10% hike this April. People’s spending power is being reduced, while businesses are seeing their operating costs rise along with their National Insurance Contributions.
“We need to see a balanced approach which supports the economy in the long term, while kick-starting things now. Consumers need confidence in the people leading the country, and the government needs to win them over sooner, rather than later.”
