The exact date when interest rates could fall if the Bank of England makes a decision this week
MILLIONS of households may soon be able to catch their breath again as interest rates are forecast to remain at their current levels.
Decision-makers at the Bank’s Monetary Policy Committee (MPC) are expected to keep the base rate at 5.25% for the fifth time in a row on Thursday, March 21.
The MPC will assess whether economic conditions are suitable to reduce, maintain or increase interest rates.
The Bank has indicated at recent meetings that cuts are likely in the future, although rates are expected to remain unchanged this week.
It comes as the base rate has risen from an all-time low of 0.1% since December 2021.
Experts now assume that an interest rate cut will likely take place in the summer, between June and August.
The Bank of England meets during the summer on May 9, June 20 and August 1.
Sarah Coles, personal finance expert at Hargreaves Lansdown, said: “At the end of last year, markets were reasonably confident that we would get a rate cut from the Bank of England in May or June, but persistent inflation at the start of the year forced them to think again.”
“At this stage, May looks highly unlikely, June is in the balance and the market is increasingly expecting a rate cut in August.”
Savings rates
What it means for savings
Savers have benefited from recent increases in the base rate, and would likely be negatively affected if it were to fall.
However, banks tend to compete for your money by offering market-leading interest rates, so make sure you do your research.
Sarah explains: “For savings, the good news is that you don’t need to know exactly what’s in the card to make the right decision, because your emergency fund should be in a competitive, easy-to-access account, so everything you need what you need to do is find the best rate available today.”
Putting money aside for any reason is always a good thing.
However, it’s good to have a plan you’re saving for as this will help you choose the best savings account for you and ensure you get the most out of your hard-earned money.
There are different ways to put money in a savings account.
The most popular are easy access accounts, which usually pay a variable interest rate that can change at any time, but you can access your money at any time, without any penalty.
The best savings rates are usually found on fixed-rate bonds. These pay a fixed interest rate over a specific period, such as one, two or five years, and you get your money and interest back once the product term expires.
What it means for your mortgage
Anyone who already has a fixed interest rate will not see their payments fall if the Bank of England cuts rates, as they are fixed for a fixed period.
So those looking to take out a mortgage must decide whether to get one now or wait until interest rates drop in the summer.
But other mortgages, such as a tracker or standard variable rate (SVR) mortgage, can also be directly affected.
SVRs are generally higher than fixed rates for this reason.
Sarah says: “For remortgagers, you are faced with the question of whether you should choose a fixed rate or switch to a tracker rate.
“Fixed rates are still quite expensive, but they do offer certainty about your expenses.”
“Tracker prices may be a bit higher today, but if prices fall from August onwards, you will see that decline.”
If you want to borrow around this time, that is also good news for you.
Alice Haine, personal finance analyst at Bestinvest, said: “Rate cuts would be a huge relief for many borrowers, especially those struggling with heavy debt or oversized mortgages.”
“A rate cut in the summer, perhaps as early as June, would provide a huge boost to potential buyers and existing homebuyers desperate for some relief from skyrocketing financing costs.”
What it means for credit cards
Certain loans you already have, such as a personal loan or car financing, usually remain the same because you have already agreed on the rate.
So you’re not likely to see any difference, but rates on future loans may be lower, and lenders may reduce rates on credit cards and overdrafts.
This doesn’t mean you should take out unnecessary loans or credit cards, as rates could rise again in the future.
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