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The Bank of England made the recent decision to reduce the rate to 4.5% (down by 0.25%) which is a boost to the housing market.
In recent years the rate has been fluctuating, reflecting the hard times of the economy. The last time the base rate was set at 4.5% was actually in March 2009, during the aftermath of the financial crisis.
A lower base rate can stimulate the economy, making it cheaper for businesses to borrow money.
It can also stimulate new job creation, with increased investment in businesses and expansion of existing businesses.
It will help generate an increase in consumer spending. Lower costs of borrowing can encourage people to take out loans and mortgages, boosting the housing demand and economic activity.
The interest rate cut will mean that around 630,000 homeowners that have mortgage tracker deals will see their payments fall by around £29-30 per month. Fixed rate deal customers will have no immediate change to their payments, but it does mean there might be some cheaper deals coming up soon, so it is a good time if you are coming up to the renewal date for your current deal.
Latest data from ‘Moneyfacts’ advises that the current average 2-year fixed deal for a residential mortgage is 5.5%.
The interest rate cut means that it is likely this will lead to a lower return on savings.
Interest rates remain uncertain. But the Bank of England is closely monitoring economic conditions and will continue to adjust the interest rates as necessary. It is predicted that the interest rate will remain at the current level for the remainder of 2025, with a gradual increase possible in 2026, however, Santander have gone against this prediction and suggested there may be 2 more base rate cuts to take place. Fluctuations can be influenced by a variety of factors.
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