Bank of England cuts interest rates to 4.5%

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Amid the noise surrounding what President Donald Trump’s tariff wars could mean for UK inflation, the Bank of England’s decision to cut interest rates is a clear signal of intent to breathe new life into Britain’s sluggish economy.

“With consumers and businesses alike grappling with high borrowing costs, the move underscores policymakers’ balancing act between taming inflation and stimulating economic growth. However, whether it will be enough to shift the dial meaningfully remains to be seen, especially with global economic uncertainty still looming large.”

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Mortgages

“The cut to interest rates is welcome news for borrowers, particularly those with variable-rate mortgages and other forms of debt, as it could mean lower monthly repayments. Many households are still struggling with the lingering effects of the cost-of-living crisis, so even a small reduction in borrowing costs could provide some much-needed financial relief.

“However, the extent of this benefit depends on how quickly and to what degree lenders pass on the cuts to consumers. Fixed-rate mortgage holders won’t see an immediate impact, but if expectations of lower rates persist, we could see better deals emerge for new borrowers and those looking to remortgage.

“If mortgage costs start to ease, more people may feel confident about entering the property market. This could lead to increased demand, which might push house prices higher in some areas. However, buyers will need to weigh this against other economic factors, such as wage growth and inflation.”

Savers

“An interest rate cut is unwelcome news for savers, who have finally been enjoying decent returns on cash deposits after years of rock-bottom rates. While savings accounts will still offer a safe place for cash, the most competitive rates are likely to dwindle further.

“Those who can afford to lock away their money for five years or more should consider investing. While investing carries risks, history shows that the stock market tends to outperform cash over the long term. A well-diversified portfolio can help spread risk, and by drip-feeding money in regularly, investors can smooth out market fluctuations.”