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Exact date interest rates could FALL as Bank of England makes decision this week – what it means for mortgages & savings
The base rate currently stands at 5.25%
MILLIONS of households may soon be able to take another breather as interest rates are predicted to stay where they are.
Decision-makers on the Bank's Monetary Policy Committee (MPC) are expected to keep the base rate at 5.25% for the fifth consecutive time on Thursday, March 21.
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The MPC will be looking at whether the economic conditions are right to start cutting rates, keep them as they are or increase them.
The Bank has signalled at recent meetings that cuts are likely to come in future, although rates are expected to remain unchanged this week.
It comes as the base rate has increased from historic lows of 0.1% since December 2021.
Experts now reckon an interest rate cut is most likely to come in summer between June and August.
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The Bank of England is meeting on May 9, June 20 and August 1 over the summer.
Sarah Coles, personal finance expert at Hargreaves Lansdown said: “At the end of last year, the markets were fairly convinced we would get a Bank of England rate cut in May or June, but sticky inflation at the start of the year forced them to re-think.”
“At this stage, May is looking highly unlikely, June is in the balance, and the market is increasingly expecting an August rate cut.”
Savings rates
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What it means for savings
Savers have benefitted from the recent hikes in the base rate, and would likely be negatively impacted if it fell.
However, banks tend to battle it out for your cash by offering market-leading interest rates so make sure to do your research.
Sarah explains: “For savings, the good news is that you don’t need to know exactly what’s on the cards in order to make the right decision, because your emergency fund needs to be in a competitive easy access account, so all you need to do is find the best available rate today.”
Putting money aside for any reason is always a good thing.
It is good to have a plan for what you are saving for though as this will help you choose the best savings account for you and ensure you are getting the best out of your hard-earned money.
There are several ways to put money into a savings account.
The most popular are easy-access accounts, which usually pay a variable rate of interest that can be changed at any time but you are able to access your money whenever you want without any penalties.
The best savings rates can usually be found on fixed-rate bonds. These pay a set rate of interest over a defined period such as one, two or five years and you get your money and interest owed back once the product term ends.
What it means for your mortgage
Anyone already on a fixed rate won't see their payments go down when the Bank of England cuts rates, as they are fixed for a certain period.
So those looking to get a mortgage will need to weigh up whether they get one now or wait to see if rates drop in summer.
But other mortgages, such as a tracker or standard variable rate (SVR) mortgage, can be impacted straight away.
SVRs are generally higher than fixed rates for that reason.
Sarah says: “For remortgagers, you face the question of whether to pick a fixed rate or move to a tracker rate.
"Fixed rates are still pretty expensive, but offer certainty over your outgoings.”
“Tracker rates may be a bit higher today, but if rates do fall from August, you’ll start to see that drop.”
If you're looking to borrow around this time it's good news for you too.
Alice Haine, personal finance analyst at Bestinvest said: “Rate cuts would be a huge relief for many borrowers, particularly those grappling with heavy debts or oversized mortgages.”
“An interest rate cut in the summer, perhaps as early as June, would deliver a huge boost to prospective buyers and existing homebuyers desperate for some relief from sky-high borrowing costs.”
What it means for credit cards
Certain loans you already have like a personal loan or car financing will usually stay the same anyway, as you've already agreed on the rate.
So it is not likely you will see any difference, but rates for any future loans could be lower, and lenders could lower the rate on credit cards and overdrafts.
This doesn’t mean you should take out unnecessary loans or credit cards as the rates could increase again in the future.
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