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Sheilpa Panchal

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UK Interest Rates Cut Again: What Does This Mean for Borrowers and Savers?

CREATED BY SHEILPA PANCHAL
Published: 10/11/2024 @ 12:01PM

The Bank of England's decision to reduce interest rates has ignited a fervent discussion among economists and financial professionals. On one hand, this move is perceived as an essential measure to stimulate economic growth following the Budget; however, there are apprehensions that it could result in an increase in inflation ...

UK Interest Rates Cut Again: What Does This Mean for Borrowers and Savers?

Interest rate fluctuates, Numbers rise and numbers fall, Money's ebb and flow

The Bank of England's Monetary Policy Committee voted 8-1 in favour of cutting interest rates to 4.75%, a move that was widely expected by financial markets. This decision was made in response to the recent Budget, which outlined increased spending measures that are expected to boost economic growth.

However, the Bank also expressed concerns over the potential impact of these measures on inflation!

The Bank's governor, Andrew Bailey, emphasised that the path for interest rates is 'downward from here', but cautioned that it will be a gradual process. This is due to the many risks that exist both domestically and globally, which could have an impact on the UK economy. As a result, the Bank is taking a cautious approach to further rate cuts.

For borrowers, this latest interest rate cut could mean a decrease in their monthly mortgage payments. More than one million mortgage borrowers on tracker and variable deals are likely to see an immediate fall in their repayments. This is good news for those struggling to make ends meet, especially in the current economic climate.

However, it's important to note that mortgage rates are still relatively high compared to previous years!

On the other hand, savers may not be as pleased with the Bank's decision. With interest rates falling, the returns on savings accounts and other investments are likely to decrease. This could have a significant impact on those who rely on their savings for income, particularly retirees. However, the slower pace of rate cuts means that savers may still be able to find better deals than they would have if the Bank had made more drastic cuts.

The Bank's decision also has implications for the wider economy. Lower interest rates can stimulate economic growth by making it cheaper for businesses and individuals to borrow money. This could lead to increased investment and consumer spending, which in turn can boost economic activity. However, there are concerns that this could also lead to a rise in inflation, as more money is circulating in the economy.

Inflation, which measures the pace of price rises, had fallen below the Bank's 2% target in the year to September. However, it was expected to rise again after gas and electricity prices increased last month. The Bank's latest forecast suggests that inflation will continue to rise in the short term, but will eventually drop back to the 2% target by 2026. This is a positive sign for borrowers, as it means that the Bank is taking measures to keep inflation under control.

The Bank of England's decision to cut interest rates has both positive and negative implications for borrowers and savers!

While mortgage borrowers may see a decrease in their monthly payments, savers may see a decrease in their returns. The Bank's cautious approach to further rate cuts shows that they are mindful of the potential risks to the economy.

It remains to be seen how the UK economy will respond to this latest move, but for now, borrowers can enjoy some relief while savers may need to explore other options for their investments.

Until next time ...

 


SHEILPA PANCHAL
Call me on 07956 463259

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested

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About ...

Q & A Financial Solutions is a Mortgage and Insurance broker predominately covering Bucks, Beds & Northants and, with up-to-date technology, we can provide a service wherever you may be in the UK. 

A mortgage is likely to be the biggest financial commitment you will ever make so it is vital to make the right product choice. With so many mortgage products available, it makes sense to seek advice from a professional advisor to ensure that you secure the best possible financial solution for your individual circumstances.

At Q & A Financial Solutions, we do all the hard work for you. We pride ourselves in giving professional, honest mortgage and protection advice, with first-class customer service.

Q & A Financial Solutions LLP is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.

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