The UK’s base interest rate is expected to fall to its lowest point in more than 18 months, providing a welcome boost for mortgage holders.
Analysts believe the Bank of England will cut the interest rate from 4.75 per cent to 4.5 per cent in its monthly announcement on Thursday at midday.
The base rate helps dictate the cost of borrowing such as taking out mortgage with some products, known as tracker mortgages, following it.
The figure also impacts rates paid by individuals and businesses to take out loans.
But after the rate rose as high as 5.25 per cent in late 2023, there is an indication it will continue to fall, especially after inflation unexpectedly fell to 2.5 per cent in December.
Interest rates are typically raised when inflation is high to discourage people from spending money, thereby slowing the rate of price rises.
However, with economic growth stagnating across the UK, many believe the Bank will make another interest rate cut to encourage more spending and stimulate the economy.
Key points
- UK interest rates set to fall at Bank of England meeting on Thursday
- Could interest rates go up?
- Why does the Bank of England change interest rates?
- How do changes in interest rates impact mortgages?
Services job cuts rise as stagflation takes ‘a firmer hold’ of sector
07:24
,
Holly Evans
Tim Moore, economics director at S&P Global Market Intelligence, said: “January data highlighted a challenging business environment for UK service providers as stagflation conditions appeared to take a firmer hold at the start of the year.
“Output levels increased only marginally while input cost inflation accelerated for the fifth month in a row to its highest since April 2024.
“Businesses widely noted sharply rising salary payments and many also felt the impact of suppliers passing on forthcoming increases in employers’ national insurance contributions.”
He added: “A range of growth headwinds at home and abroad were cited by survey respondents, including elevated interest rates, geopolitical uncertainty and a post-Budget slide in domestic business confidence.
“The twin perils of shrinking workloads and rising payroll costs meant that many service providers put the brakes on recruitment in January.”
Growing proportion of first-time buyers ‘think now is a good time’ to purchase
07:01
,
Athena Stavrou
The proportion of first-time buyers who believe now is a good time to purchase a property has doubled over the past year, according to research for a body representing building societies.
A third (33%) of first-time buyers think now is a good time, compared with 16% in December 2023, the Building Societies Association (BSA) said.
Could rates go up?
05:01
,
Athena Stavrou
Some recent announcements have indicated that inflation could be on the way back up, albeit more gradually, posing a potential problem for the Bank.
On Wednesday, a survey of companies in the service sector, which includes everything from shops and pubs to finance firms and lawyers, found that cost inflation in the industry nudged up in January.
Most economists think these signs of rising inflation are unlikely to put policymakers off cutting rates on Thursday, but it could lead them to be more cautious at future meetings in March and May.
When will we know if rates have dropped?
03:47
,
Athena Stavrou
The Bank of England is expected to announce its interest rate decision from the monetary policy committee at midday on Thursday.
The announcement will be followed at 12: 30pm by a press conference at the bank, with Governor Andrew Bailey.
Why do interest rates change?
02:32
,
Athena Stavrou
The Bank typically raises interest rates when inflation is high to discourage people from spending money, thereby slowing the rate of price rises.
Now, inflation – which measures how fast prices are rising across the economy – is much lower than the highs of recent years, at 2.5% per year.
And economic growth is stagnating across the UK, leading to predictions of another rate cut, which would encourage more spending and stimulate the economy.
Full story: UK interest rates set to fall at Bank of England meeting on Thursday
01:06
,
Athena Stavrou
The cost of borrowing is expected to fall to its lowest point in more than 18 months on Thursday.
Senior economists at the Bank of England will announce whether they are cutting the UK’s base interest rate, which currently sits at 4.75%.
Most experts predict a quarter point reduction to 4.5%, continuing a series of cuts which started last summer.
The base rate helps dictate how expensive it is to take out a mortgage or a loan, while it also influences the interest rates offered by banks on savings accounts.
Read the full story here:
Growing proportion of first-time buyers ‘think now is a good time’ to purchase
00:03
,
Athena Stavrou
The proportion of first-time buyers who believe now is a good time to purchase a property has doubled over the past year, according to research for a body representing building societies.
A third (33%) of first-time buyers think now is a good time, compared with 16% in December 2023, the Building Societies Association (BSA) said.
Stamp duty costs are set to become more expensive for some buyers from April, when the “nil rate” band for first-time buyers will shrink from £425,000 to £300,000. Stamp duty applies in England and Northern Ireland.
The BSA’s research indicated that a fifth (22%) of people generally think stamp duty costs are an obstacle to buying a new home, falling to 16% among first-time buyers.
The affordability of monthly mortgage payments and raising a deposit are generally seen as bigger barriers to home-ownership, the survey indicated.
How does the rate impact mortgages?
Wednesday 5 February 2025 22:49
,
Athena Stavrou
The base rate helps dictate how expensive it is to take out a mortgage or a loan, while it also influences the interest rates offered by banks on savings accounts.
Hikes in recent years, designed to combat skyrocketing inflation, have left mortgage rates much higher than was normal for most of the last decade.
The base rate rose as high as 5.25% in late 2023, but the Bank’s policymakers cut it to 4.75% over the course of several months last year.
When will we know if rates have dropped?
Wednesday 5 February 2025 21:32
,
Athena Stavrou
The Bank of England is expected to announce its interest rate decision from the monetary policy committee at midday on Thursday.
The announcement will be followed at 12: 30pm by a press conference at the bank, with Governor Andrew Bailey.
Why does the bank change interest rates?
Wednesday 5 February 2025 20:11
,
Athena Stavrou
The Bank typically raises interest rates when inflation is high to discourage people from spending money, thereby slowing the rate of price rises.
Now, inflation – which measures how fast prices are rising across the economy – is much lower than the highs of recent years, at 2.5% per year.
And economic growth is stagnating across the UK, leading to predictions of another rate cut, which would encourage more spending and stimulate the economy.
Could rates go up?
Wednesday 5 February 2025 19:03
,
Athena Stavrou
Some recent announcements have indicated that inflation could be on the way back up, albeit more gradually, posing a potential problem for the Bank.
On Wednesday, a survey of companies in the service sector, which includes everything from shops and pubs to finance firms and lawyers, found that cost inflation in the industry nudged up in January.
Most economists think these signs of rising inflation are unlikely to put policymakers off cutting rates on Thursday, but it could lead them to be more cautious at future meetings in March and May.
Full story: UK interest rates set to fall at Bank of England meeting on Thursday
Wednesday 5 February 2025 18:00
,
Athena Stavrou
The cost of borrowing is expected to fall to its lowest point in more than 18 months on Thursday.
Senior economists at the Bank of England will announce whether they are cutting the UK’s base interest rate, which currently sits at 4.75%.
Most experts predict a quarter point reduction to 4.5%, continuing a series of cuts which started last summer.
The base rate helps dictate how expensive it is to take out a mortgage or a loan, while it also influences the interest rates offered by banks on savings accounts.
Read the full story here:
Interest rates expected to fall
Wednesday 5 February 2025 16:34
,
Athena Stavrou
The UK’s base interest rate is expected to fall to its lowest point in more than 18 months, providing a welcome boost for mortgage holders.
Analysts believe senior economists at the Bank of England will cut the interest rate from 4.75 per cent to 4.5 per cent in its monthly announcement on Thursday morning.
The base rate helps dictate the cost of borrowing such as taking out mortgage with some products, known as tracker mortgages, following it.
The figure also impacts rates paid by individuals and businesses to take out loans.
