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Bank of England (BOE) announced its decision on Thursday Interest rates cut by 3.75 percentFourth cut of the year.
For the December vote, the bank’s nine-member monetary policy committee showed little change from the last time it pre-budget in November; The 5–4 split was again in favor of holding and this time it became a 5–4 split in favor of cutting, with Governor Andrew Bailey being a key switcher.
next falling inflation ratesPoor economic data and rising unemployment take the base rate to its lowest level in nearly three years.
Here’s a brief overview of what the current interest rates might mean for you:
What do interest rates mean for a mortgage?
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, that 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 they will see an immediate change. Many people have fixed-term deals, which 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 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 deal, you may see a change in your repayments.
New mortgage products are based on swap rates – market agreements based on future expectations interest rate Movements – Instead of the current bank rate, this is why it happened Recently there has been a battle among lenders to lower their rates Even before the cut today.
What about savings accounts?
if you have Wealth one in savings account, here’s the other side of the story: Lower rates mean you’ll earn less interest.
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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’s still the opportunity to save and earn Wealth At a better rate than inflation, which currently stands at around 3.2 percent.
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, soon to be reduced to £12,000, with the other £8,000 reserved for tax-free investments.
Bills and Repayments
Of course, credit card repayments and other types of personal loans are also affected by this interest ratesBecause the amount they charge to borrow can be changed.
For credit card users (and especially buy now, pay later deals), it’s always ideal to pay the full amount off each month if you’re able, so as not to incur any interest at all – depending on your circumstances and account type, they can be one of the more expensive ways to borrow.
Again, it may not be as immediate as lenders changing their rates after a base rate change, but if you think your payment could or should be lower, contact them to assess your options.