Interest rates live: Reeves says cut could shave £100 off monthly mortgage payments

Interest rates have been cut to their lowest in almost three years as budget measures are taken to curb inflation, but the Bank of England has warned that further cuts would be a “close call”.

The bank’s Monetary Policy Committee (MPC) voted to cut rates from 4% to 3.75%.

Governor Andrew Bailey said the UK “has passed the recent peak of inflation and is continuing to decline”, allowing the MPC to cut borrowing costs for the fourth time this year.

“We still think rates are slowly moving downwards,” he said.

“But every cut we make makes it clear just how far we go.”

The pound, which had earlier weakened against the dollar, was steady at $1.34 after the bank’s decision to cut rates.

Sterling was 0.2 percent higher at 1.14 euros.

In the London market, the FTSE 100 index was largely unchanged, down 2.1 points at 9772.3.

Trade union TUC said that while the decision is welcome, it does not go far enough to support the UK’s fragile economy and called on the Bank of England to move “further and faster” in 2026.

Paul Novak, general secretary of the TUC, said: “This rate cut is welcome – but a repeat cut is not enough for a fragile economy struggling with stagnant demand and failing confidence.

“The Bank should be cautious moving further ahead next year beyond 2025 – it is important that this marks the beginning of a sequence of quick-fire and substantial rate cuts.

“This is what households and companies need right now. More money in the pockets of working people means more spending on our high streets – and lower interest rates will give companies the confidence to invest and encourage wealthier households to spend.”

The Bank of England said members of the bank’s Monetary Policy Committee (MPC) voted 5-4 to cut interest rates to 3.75 percent.

Five members – Andrew Bailey, Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor – voted in favor of the cuts, securing a majority.

On Thursday, Chancellor Rachel Reeves described the rate cut as “good news for households with mortgages and businesses with debt.”

The cut came as the bank said last month’s budget measures would help reduce inflation faster than previously expected.

According to the MPC, the budget measures are likely to reduce CPI inflation by about 0.5 percentage points.

Low inflation expectations are likely to have contributed to the decision to cut rates.

However, many MPC members also linked their vote for an interest rate cut to weak growth in the UK economy.

Deputy Governor Dave Ramsden highlighted the “dull growth outlook” and “continued weak consumer confidence” in justifying his vote for the cuts.

The Monetary Policy Committee (MPC) of the Bank of England reduced the base interest rate by 0.25 percentage points to 3.75%.

The nine-member committee voted four to five in favor of the cuts.

Five members – Andrew Bailey, Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor – voted in favor of the cuts.

Meanwhile, four – Megan Green, Claire Lombardelli, Katherine Mann and Hugh Pill – preferred to keep rates at 4%.

Interest rates have been cut for the sixth time since early last year, down from a high of 5.25%.

if you have Wealth one in savings Account, this is another aspect of looking at mortgage: Lower rates mean you’ll get less interest.

As there is a fierce battle raging between banks and building societies for customers, it is still possible to get good deals if you are happy to lock in. Wealth Contribute for a fixed period or in regular amounts, many of which offered more than 4 percent until recently.

However, it is likely that some will be removed from the market or have their rates changed in the coming days, while many of the best deals on easy access accounts have been below 4.5 per cent for some time.

There are always terms and conditions to meet, so make sure any account you open suits your circumstances, but there is still an opportunity to save and earn money at a better rate than inflation, which is currently around 3.2 per cent.

However, be aware of how much interest you can earn without being taxed. if your savings The interest rate on the account is not fixed, banks can always change the rate you receive up or down.

One tax-efficient way to save is to use a Cash ISA, where everyone (for now!) gets a personal allowance of £20,000 each year, which will soon reduce to £12,000 and the other £8,000 will be reserved for tax-free investments.

Rachel Reeves said the interest rate cut could shave £100 off monthly mortgage payments for first-time buyers.

The Chancellor told broadcasters during a visit to a community center in north London: “It is welcome news for households and businesses that the Bank of England has cut interest rates six times since the general election, taking interest rates down to 3.75%, the lowest in almost three years, and the fastest pace of interest rate cuts in 17 years.

“This could mean £100 less per month for a first-time buyer with an average-sized mortgage due to continued interest rate cuts.”

Broadly speaking, as it is increasing interest rates While mortgage repayments have increased over the years, the reverse is also true: the lower the rates, the lower the repayments. However, there are several important things to note.

Firstly, it is only the interest on repayments that should change – the more you pay off your mortgage, the lower your capital repayments will naturally be. Secondly, the base rate is not necessarily the rate charged by your bank or lender for a mortgage – they will base theirs on the BoE rate but it does not have to be the same.

However, more than half a million people have a mortgage that tracks the BoE interest rate and would see an immediate change. Many people have fixed-term deals that expire each year and need to be renegotiated – around 2 million households are expected to look for renewed deals in 2026.

If you have a fixed term term on a mortgage plan, you won’t see a change in any case until it ends and you start a new one, but if you’ve already finished and moved onto a standard variable rate (SVR) deal you may see a change in your repayments.