The Bank of England is widely expected to cut interest rates on Thursday, with further falls expected during the rest of the year. The Bank's Monetary Policy Committee cut rates to the current level of 4.5% in February. Interest rates affect mortgage, credit card and savings rates for millions of people. An interest rate tells you how much it costs to borrow money, or the reward for saving it. The Bank of England's base rate is what it charges other banks and building societies to borrow money. That influences what they charge their own customers for loans such as mortgages as well as the interest rate they pay on savings. The Bank moves rates up and down in order to keep UK inflation - which is theincrease in the price of something over time- at 2%. When inflation is above that target, the Bank can decide to put rates up. This encourages people to spend less, reducing demand for goods and services and limiting price rises. Once inflation is at or near the target, the Bank may hold rates, or cut them to stimulate spending and economic growth. It is difficult to predict exactly what will happen to interest rates. The main inflation measure, CPI, was2.6% in the 12 months to March 2025, down slightly from the previous month. Although that is far below the peak of 11.1% reached in October 2022, inflation remains above the 2% target. As well as inflation, the Bank has to consider how the UK economy is doing more generally. It also pays close attention to the performance of the global economy, which has been thrown into chaos by the widespread tariffs introduced by US President Donald Trump. Bank of England governor Andrew Bailey previously said he would take a gradual and careful approach to cutting rates. But the uncertainty caused by US tariffs may mean UK interest rates fall further than predicted as the Bank seeks to help boost the economy. Some analysts believe rates could fall to 3.5%. Mortgages Just under a third of households have a mortgage, according tothe government's English Housing Survey. About 600,000 homeowners have a mortgage that "tracks" the Bank of England's rate, so a base rate change has an immediate impact on their monthly repayments. But the vast majority of mortgage customers have fixed-rate deals. While their monthly payments aren't immediately affected by a rate change, future deals are. Mortgage rates are still much higher than they have been for much of the past decade. As of 6 May, the average two-year fixed mortgage rate was 5.16%, according to financial information company Moneyfacts, and a five-year deal was 5.09%. The average two-year tracker was 5.16%. This means many homebuyers and those remortgaging are having to pay a lot more than if they had borrowed the same amount a few years ago. About 800,000 fixed-rate mortgages with an interest rate of 3% or below are expected to expire every year, on average, until the end of 2027. Their borrowing costs are expected to rise sharply. Lenders have beenreducing rates on new fixed dealsin expectation that UK interest rates will fall further. You can see how your mortgage may be affected by future interest rate changes by using our calculator: Credit cards and loans Bank of England interest rates also influence the amount charged on credit cards, bank loans and car loans. Lenders can decide to reduce their own interest rates if Bank cuts make borrowing costs cheaper. However, this tends to happen very slowly. Savings The Bank base rate also affects how much savers earn on their money. A falling base rate is likely to mean a reduction in the returns offered to savers by banks and building societies. The current average rate for an easy access account is 3% a year. Any cut could particularly affect those who rely on the interest from their savings to top up their income. In recent years, the UK has had one of the highest interest rates in the G7 - the group representing the world's seven largest so-called "advanced" economies. In June 2024, the European Central Bank (ECB) started to cut its main interest rate for the eurozone from an all-time high of 4%. After a series of cuts, this now stands at 2.25%. In the US, the central bank - the Federal Reserve - cut rates three times in the latter part of 2024, but held interest rates in March, meaning its key lending ratehas a target range of 4.25% to 4.5%. The Fed's decisions havecome under attack from President Trump, who wants to see further cuts.
When will interest rates go down again?
TruthLens AI Suggested Headline:
"Bank of England Set to Announce Interest Rate Cuts Amid Ongoing Inflation Concerns"
Bbc News
7.8
TruthLens AI Summary
The Bank of England is poised to announce a reduction in interest rates, with expectations of further cuts throughout the remainder of the year. Currently, the interest rate stands at 4.5%, a level that was established in February. Interest rates play a crucial role in the economy, influencing the cost of borrowing for mortgages, credit cards, and savings accounts for millions of individuals. The Bank's base rate is the rate at which it lends to other banks and financial institutions, which subsequently affects the rates those institutions offer to their customers. The primary aim of the Bank of England's rate adjustments is to maintain inflation at a target of 2%. When inflation surpasses this target, the Bank typically raises rates to curb spending and limit price increases. Conversely, when inflation approaches the target, the Bank may opt to lower rates to stimulate consumer spending and economic growth. As of March 2025, the Consumer Price Index (CPI) indicated an inflation rate of 2.6%, a decrease from previous months but still above the desired threshold, indicating a delicate balancing act for the Bank as it considers both domestic economic conditions and the impact of global economic factors, such as the tariffs imposed by the United States under President Trump's administration.
The implications of interest rate changes are significant for homeowners, particularly those with mortgages. Approximately one-third of UK households are mortgage holders, and around 600,000 of these have mortgages that directly track the Bank of England's base rate, meaning their repayments will adjust immediately in response to any rate changes. However, the majority of mortgage holders are on fixed-rate deals, which means their current payments will remain stable until their contracts expire, though future borrowing costs may rise. Current mortgage rates are significantly higher than in previous years, with the average two-year fixed mortgage rate noted at 5.16%. Additionally, the Bank's decisions will also influence credit card and loan interest rates, as lenders may adjust their rates in response to changes in the Bank's base rate, albeit at a slower pace. Savers may also feel the impact of falling rates, as lower base rates typically translate to reduced returns on savings accounts, affecting those who depend on interest income. As the Bank navigates these complex dynamics, analysts speculate that interest rates could potentially decrease to as low as 3.5% by the end of the year.
TruthLens AI Analysis
The article explores the anticipated interest rate cuts by the Bank of England, highlighting their potential implications for the economy and consumers. It provides an overview of how interest rates influence various financial aspects, such as mortgages, credit cards, and savings. The article also discusses the broader economic context, including inflation and external factors affecting the UK economy.
Implications of Interest Rate Cuts
The imminent interest rate cuts are expected to stimulate economic growth, particularly as inflation remains above the target of 2%. The reduction in rates would lower borrowing costs, making mortgages and loans more affordable, which could lead to increased consumer spending. By emphasizing the potential drop in interest rates, the article aims to create a sense of optimism among consumers and investors.
Public Perception and Concerns
This news piece is likely designed to reassure the public that the Bank of England is taking steps to manage inflation and support economic recovery. However, it may also mask underlying concerns, such as the long-term impacts of rising inflation and the uncertainties caused by global economic factors, particularly the tariffs imposed by the US.
Manipulative Elements
The article presents a relatively balanced view of the situation, but it could be argued that it simplifies the complexities surrounding interest rate decisions. By focusing on potential rate cuts, it may inadvertently downplay the risks associated with persistent inflation and external economic pressures. The language used is straightforward, avoiding alarmist tones, which may suggest a more optimistic scenario than the reality might warrant.
Comparative Analysis
When compared to other news pieces on economic policy, this article aligns with a broader narrative of cautious optimism regarding economic recovery. It shares similarities with articles highlighting government efforts to stimulate growth through monetary policy but may lack a deeper exploration of the potential consequences of these decisions.
Economic Impact and Market Reactions
The anticipated interest rate cuts could have significant implications for the stock market and investor sentiment. Sectors such as real estate and consumer goods may particularly benefit from lower borrowing costs, leading to increased activity in those areas. Investors will be closely watching the Bank of England's decisions, as they could influence stock values and market trends.
Community Support and Stakeholder Engagement
The article likely appeals to a wide range of stakeholders, including homeowners, potential buyers, and businesses reliant on lending. By addressing the concerns of these groups, it seeks to foster a sense of support for monetary policy decisions and their potential benefits.
Global Context and Relevance
In terms of global dynamics, the article reflects ongoing economic challenges exacerbated by international trade policies. The reference to US tariffs indicates a connection to broader geopolitical issues that could affect the UK economy, highlighting the interconnectedness of global markets.
The straightforward nature of the article suggests that it was likely not generated by AI, as the writing is coherent and contextually rich. However, if AI were involved, it might have influenced the tone to promote a positive outlook on economic recovery.
In conclusion, while the article provides useful insights into potential interest rate changes, the overall reliability is mixed. It presents factual information but may oversimplify the complexities of economic conditions and their implications. The intent appears to be to instill confidence in the public regarding the Bank of England's actions.