Interest rates LIVE: Bank of England set to make major cut as economy struggles
The Bank of England is poised to slash interest rates to 4% today – the lowest level in over two years – in a dramatic move to boost Britain’s faltering economy.
It would mark the fifth cut since last August, bringing the rate down to its lowest since March 2023. The Monetary Policy Committee (MPC) is widely tipped to reduce the base rate by 0.25% to 4%, with the decision set to be announced at midday today.
Brits are hoping the move will pave the way for cheaper deals for mortgage holders and new buyers, but it also means a smaller return for savers. It comes as the UK economy struggles with rising inflation against the background of a trade war sparked by Donald Trump’s tariffs.
FTSE 100 falls as Trump tariffs come into effect
At 9:15am, the FTSE 100 index was down 28.09 at 9136.22 after opening at 9164.31.
It comes after Donald Trump’s new tariff rates came into effect after a week-long delay. Germany’s DAX meanwhile rose 0.9% to 24,137.51 and the Euro Stoxx 50 index is up 0.3%. Most world shares have advanced, showing little to no reaction to Trump’s higher tariffs on exports to the US.
Cuts likely to go ahead despite high inflation
The current UK inflation is 3.6% – which is above the 2% target, but some signs show the economy is slowing down. Recent figures show fewer people are getting hired, unemployment is going up and wages are growing more slowly.
The BoE are likely to go ahead with interest rate cuts, even if inflation is still a bit high, because the UK economy needs support at the moment.
Vote to be held at 12pm
At 12pm, nine MPC members of the Bank of England will take part in a vote on the new interest rates.
A 25 basis points cut is likely, which means the current interest rate of 4.25% is likely to drop to 4%. A majority vote, in this case, five, are needed to arrive at a decision. The cut will come into force immediately if voted for.
What lower interest rates mean for Brits
If you have a mortgage, lower interest rates m your monthly payments might go down. For a typical £250,000 mortgage, you could save about £40 a month, according to Moneyfacts. Those on a fixed term on a mortgage plan won’t see changes until that comes to an end.
But if you’re a saver, the interest you earn on your savings will likely be cut, giving you a smaller return. In this case, the average return rate would drop from 3.9% in August last year to 3.5%.
Bank of England tipped to cut base rate to 4% today
The Bank of England is tipped to lower interest rates this afternoon, with an announcement due around noon.
- Right now, the interest rate is 4.25%. BoE might cut it down to 4%.
- That would make borrowing money cheaper (like loans and mortgages).
- But it would also make saving money less rewarding, because you’d earn less interest on savings.
Why are interest rates being cut?
Interest rates are being cut because the UK economy hasn’t been growing much lately.
It didn’t grow at all in April and May, with Chancellor Rachel Reeves calling its recent performance “disappointing.”
Lowering interest rates is a way to try to boost the economy by encouraging people and businesses to borrow and spend more.