The Bank of England (BoE) is expected to cut interest rates today down to 4 per cent, despite concerns over still-high inflation and Trump tariffs coming into force.
The move would mark a third cut overall this year, and the fifth since the interest rates peaked at 5.25 per cent in August 2024. Members on the Monetary Policy Committee (MPC) are likely to be divided on whether to cut the rate, with divisions over both holding until later in the year - to combat the rate of inflation - and giving a double cut now, which could boost business productivity and employment.
Any cut would also be a potential longer-term boost to homeowners, as the mortgage market may price in future lower rates, but would give concerns to savers as the rate at which their money earns interest would decrease.
Elsewhere, Halifax released its latest UK house price data showing where property fees have risen fastest, while stock markets including the FTSE 100 are reacting to Trump tariffs coming into effect.
Follow The Independent’s live coverage of the latest stock market and business news here:
Key points
- Bank of England expected to cut interest rates to 4% in 12pm announcement
- Reeves urged to raise taxes to cover £50bn fiscal hole
- FTSE 100 falls on opening as Trump tariffs come into effect
- How do interest rates affect your mortgages and savings?
Interest rates chart: The fall and rise in the UK
11:47
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Karl Matchett
Here’s a more graphic representation of just how high interest rates rose as inflation spiralled under the last government - and how rates are still only slowly coming back down under this one.
For over a decade, borrowing money was super cheap, very nearly free.
Anyone with repayments to make between 2020 and 2023 got a bit of a shock to the system if their deal was tracking the base rate, that’s for sure.
But we are, as the right side of the chart shows, on a steady path downwards in the past year or so. “Gradual and careful,” the BoE calls it.
Plenty say that even this is too fast though, with inflation having been rising once more of late.
Supermarket wars continue with new cheapest store
11:40
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Karl Matchett
The UK has a new cheapest supermarket, if you’ve not already heard - Aldi lost the title for the first time in two years.
You can read more about that here including how loyalty cards impact (or don’t!), and you can vote in our poll below to tell us where you shop too!
Households still cautious over future tax burdens - expert
11:30
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Karl Matchett
Aside from being a negative for savers, most households will generally see an interest rate cut as a positive.
However, the savings it makes them on bills and borrowing may not feed through to spending immediately, says one expert - because of fears about what lies ahead.
That’s particularly prevalent given talk of more taxes in the Budget this autumn.
“Investors are primed for an interest rate cut from the Bank of England later today, given the highly sluggish nature of the economy, and the rising unemployment rate,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“There will be hopes that if loans become cheaper, it will help boost consumer and business confidence but there’s a long way to go. In the meantime, speculation over potential tax rises in the Autumn Budget may keep households and companies cautious, given the uncertainty over where extra burdens may land.
“There will be a lot of focus on the voting split on the Monetary Policy Committee, given that the views are highly unlikely to be unanimous, and the leaning of members could help indicate the speed of future rate cuts.”
Interest rates and mortgages: Saving money, or overpay the difference?
11:20
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Karl Matchett
If you’re on a tracker mortgage rate (or if you’re soon to negotiate down a deal from a couple of years ago) then an interest rate cut today could be to your benefit, saving a bit of outgoing money.
However, if you still put that into paying off your property (if your terms allow - always check!) then it can save you way more in the long run.
Jinesh Vohra, CEO of mortgage app Sprive, said: “Around one in five (17 per cent) mortgage holders are currently on variable rate mortgages, and if the Bank of England cuts the base rate today, their mortgage rate will drop as a result.
“For example, someone with a £150,000 mortgage at 4.25% over 25 years currently pays around £812 a month.
If the rate is cut by 0.25%, their monthly payment would fall to £791 — a saving of £21 a month, or £252 a year.
“While it might be tempting to enjoy that saving, those who can afford to should consider maintaining their current payment level and using the £21 saving to overpay their mortgage instead. Doing so could save them £4,280 in interest and help clear their mortgage 1 year and 1 month earlier.
“Overpaying is one of the most powerful ways to become mortgage-free faster. Even small, regular overpayments can knock years off the term and save thousands in interest — helping mortgage holders reach financial freedom sooner, without stretching their budget.”
Companies latest: Deliveroo, WPP, InterContinental
11:07
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Karl Matchett
Here’s a quick wrap of the latest companies announcements and financials this morning:
Deliveroo saw sales increase in the first half of the year with more people ordering takeaways, but the company swung to a loss even so. It is set for a takeover by DoorDash later this year in a £2.9bn deal.
Advertising firm WPP has cut 7,000 jobs and saw profits drop from £338m a year ago to £98m this year as a tough year continues. Shares were down 2.7 per cent this morning and have dropped by more than half this year.
And Holiday Inn’s owner, InterContinental Hotels, said a key metric in revenue per available room has slowed - but overall pre-tax profits rose 13 per cent from last year.
Mortgage market facing a reckoning as super-cheap deals come to an end
10:40
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Karl Matchett
Aside from the questions of inflation and economic growth, there’s one additional big reason why lots of people hope for interest rate cuts, now and in the coming months.
Many thousands of homeowners are set to see their five-year fixed term mortgage deals expire in the second half of 2025 - and given interest rates were 0.1 per cent for most of 2020, it’s fair to say the increased payments they face will be a big shock to the system.
One mortgage broker suggests the fall-out will dampen down house prices and many need to reassess their financial positions.
Ranald Mitchell, from Charwin Mortgages, said: “For many borrowers, 2025 will prove the hangover after the house party. Millions are waking up to find their cheap-as-chips pandemic mortgage deals have vanished, replaced with monthly payments that bite.
"For five-year fixers coming off sub-2% rates, some are facing £300–£500 extra a month. It’s not just a shock, it’s a financial slap. This won’t crash the market, but it will chill it. Potential movers may pause and reflect on their new monthly financials. The days of borrowing big and breezing through affordability checks are over.”
FTSE 100 an outlier as global stock markets rise
10:20
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Karl Matchett
Across most global markets, shares were on the up overnight and today despite those tariffs coming into effect - the UK’s FTSE 100 is very much an outlier there, as AJ Bell’s Danni Hewson explains.
“The FTSE 100 is struggling to make meaningful progress this week, running to stand still as investors weigh the latest economic, geopolitical and corporate developments,” says Ms Hewson.
“Not helping today was several heavyweight names trading without the rights to their dividend. This held the index back despite gains on Wall Street and across Asia. Investors are largely greeting widespread tariffs taking effect with a shrug.
“The exception again was India, with the Trump administration ordering a big increase in tariffs to punish the country for buying and selling Russian oil.”
UK not facing threat of stagflation - bank expert
10:00
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Karl Matchett
With economic growth still a struggle to find, you may hear the term “stagflation” being used.
That shouldn’t the case, says one industry expert - it’s not the situation the UK faces right now.
Will Hobbs, from Barclays private bank and wealth management, said current indicators do not suggest the UK is any more at risk of that than previously.
“Given the current margins for error in the UK’s economic dataset, it remains possible to tell almost any story you want on the UK’s economic outlook. Our optimistic [view] rests in part [with] household balance sheet and rising real incomes, both of which provide a buffer against broader uncertainty.
“Of course, there are multiple factors to consider. We, like the consensus, expect the Bank of England to cut rates, likely following a fairly even vote split.
“We would resist overuse of the term ‘stagflation’ to describe the UK’s position. The misery indices (unemployment plus inflation), looks unremarkable today relative to the experience of the last century.”
How interest rates impact on your money, savings and bills
09:40
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Karl Matchett
If you have money in a savings account, it’s the other side of the see-saw to mortgages: rates going down mean you’ll earn less interest.
As there’s still a bit of a fierce battle raging among banks and building societies for customers, it’s still possible to get good deals if you are happy to lock in money for a fixed period of time or contribute regular amounts, with several offering around 4.5 per cent or even more.
There are always terms and conditions to be met, so ensure it suits your circumstances, but the opportunity remains there to save and earn money at a better rate than inflation, which currently sits around 3.5 per cent.
Do be aware of the amount of interest you can earn without being taxed, though. If your savings account interest rate isn’t fixed, banks can always change the rate you get up or down.
A tax-efficient way of saving is to use a Cash ISA, where everyone has a £20,000 personal allowance each year.
Credit card repayments and bank or car loans are of course also affected by interest rates, as the amount they all charge for borrowing will be altered.
For credit card users, it’s always ideal to pay off the full amount each month if you are able to, to avoid interest being charged at all - depending on your circumstance and the account type, they can be one of the more costly ways to borrow.
For more info see here.
What do interest rate cuts mean for mortgages?
09:20
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Karl Matchett
Broadly speaking, as increasing interest rates over the last few years have meant mortgage repayments going up, then the reverse should also hold true: lower rates, lower repayments. However, there are several important things to note.
Firstly, that it’s only the interest on the repayments which should change — your capital repayments will naturally decrease the more you pay off your mortgage. Secondly, the base rate isn’t the rate you are necessarily charged by your bank or lender for the mortgage — they’ll base theirs off the BoE rate but it doesn’t have to be the same.
More than half a million people do, however, have a mortgage which tracks the BoE interest rate and those will see an immediate change. Far more have fixed term deals which expire each year and need renegotiating.
Additionally, if you’ve got a fixed term on a mortgage plan, you won’t see a change in any case until that comes to an end.
New mortgage products tend to be based on swap rates - future expectations of interest rates movements rather than the current Bank Rate, as it’s officially known.
Trump’s new import tariffs now in force against scores of countries
09:00
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Karl Matchett
New tariff rates on U.S. imports, initiated under President Donald Trump's administration, came into effect on Thursday, marking a significant development in his reshaping of global trade.
These measures include potential tariffs of up to 200% on pharmaceutical imports and a 100% import tax on computer chips.
Most U.S. imports of copper, steel, and aluminium are now subject to a 50% duty.
Significant uncertainty persists, with no agreement yet reached on tariffs for products from China.
India also faces a potential 50% tariff, as the U.S. pressures the nation to cease oil purchases from Russia.
Full details here from Elaine Kurtenbach:
Bank of England's forward guidance key after rate vote - expert
08:40
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Karl Matchett
George Vessey, lead macro strategist at Convera, is expecting another three-way split in the MPC voting.
But the more interesting element of the BoE’s explanation might be their guidance for what comes next, he says.
Economic growth still isn’t great, and that - plus jobs data - weighs against inflation.
“The BoE is expected to cut rates to 4.00 per cent today. However, given the mixed signals from recent economic data, we anticipate a three-way vote split, with two members favouring no change and two advocating for a more aggressive 50bps cut.
“There has not been a single unanimous vote in this cycle and this divergence reflects the tension between persistent inflation concerns and signs of economic slack.
“With the cut largely priced in, attention shifts to the committee’s forward guidance specifically, whether it will reaffirm its pattern of quarterly reductions or hint at a change in pace. The key uncertainty hanging over this meeting is the risk of a deeper deterioration in the labour market. So far, the evidence points to a gradual weakening rather than a sudden downturn. At the same time, inflation remains persistently high, especially in the services sector, adding another layer of complexity to the policy outlook.
“Overall, we expect the August forecasts to closely mirror May’s Monetary Policy Report, with only modest adjustments: inflation steady, GDP slightly higher on reduced tariff drag, and softer labour market projections.”
FTSE 100 falls after opening as Trump tariffs come into effect
08:20
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Karl Matchett
President Trump gave a one-week delay to his new tariff rates coming into force last week but that day has now arrived and with it comes a morning slump in the stock markets.
US stocks moved last night and Asian markets also have remained mostly strong overnight, with rises in the Shanghai, Japan’s Nikkei 225, the KOSPI in Korea and Vietnam’s VN30 - an outsized performer itself of late.
This morning however the FTSE 100 has dropped 0.2 per cent in early trading, with Germany’s DAX flat and the Euro Stoxx 50 index up 0.3 per cent.
Interest rates decision: All the key details - PINNED POST
08:02
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Karl Matchett
OK here’s what you need to know in a flashcard:
What time: 12 noon
Who votes: The nine MPC members of the Bank of England
What’s predicted: A 25 basis points cut, which means 0.25 percentage points off the current interest rate of 4.25 per cent, giving a new rate of 4.00 per cent
How many votes are needed: A majority, so five. A 5-4 split happened in May for example, with some voting for a double cut
When will a cut come into force: Immediately, if voted for
Reform gambling laws to cover child poverty cost, says think tank
07:48
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Karl Matchett
Gordon Brown has urged ministers to hike taxes on online casinos and slot machines to cover the cost of lifting children out of poverty.
Reforms to gambling taxes could generate the £3.2 billion needed to scrap the two-child limit and benefit cap, the Institute for Public Policy Research (IPPR) said.
The think tank’s latest research said axing the policies could lift half a million children out of poverty and “reverse years of rising hardship for low-income families”.
More here.
Rachel Reeves faces ‘impossible trilemma’ and must raise taxes
07:30
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Karl Matchett
Rachel Reeves faces an “impossible trilemma” ahead of the autumn budget and must raise taxes or tear up her flagship borrowing rules to fill a £50bn black hole left by Labour U-turns, higher borrowing and sluggish economic growth, top economists have warned.
The National Institute of Economic and Social Research (NIESR) – a leading economic think tank – said the chancellor could also look at spending cuts in the autumn Budget as a way to raise the money needed by 2029-30 to remedy a £41.2bn shortfall on her borrowing targets, set out by her self-imposed “stability rule”.
In order to restore the £9.9bn buffer the government has maintained since last year’s Budget, the chancellor must therefore raise a total of £51.1bn.
Millie Cooke and Kate Devlin have the detail:
What affects decisions over interest rates?
07:17
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Karl Matchett
The MPC have a lot to weigh up before deciding whether to hold, cut or raise interest rates at any given point.
Right now, members will be considering domestic inflation as a primary factor, for sure, but also economic growth and business investment prospects, and job vacancies and unemployment.
Cutting rates are one way to stimulate economic growth by lowering borrowing costs, which can bring more business investments and hiring, more jobs, more spending power.
That’s more what the UK seems to need at present.
Will interest rates be cut today?
07:07
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Karl Matchett
The Bank of England’s (BoE) next meeting to determine interest rates is on Thursday 7 August, and all eyes will be on the Monetary Policy Committee (MPC) and whether its members opt to continue lowering rates.
The base rate - currently at 4.25 per cent following cuts in February and May - impacts consumers and taxpayers through everything from their mortgages to savings, so what do experts foresee both next week and beyond?
Interest rates and latest business news
06:58
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Karl Matchett
Morning all and welcome to The Independent’s live business coverage.
Today’s main focus will be the Bank of England’s meeting later on and the MPC’s decision over interest rates.
Elsewhere we’ll keep you posted as always on the latest company news, stock market updates and everything else that affects your money matters.
