Interest rates set to fall even further – what does that mean for you?

The base rate started falling for the first time in four years last summer (Picture: Getty Images)

Interest rates could be about to fall for a fourth consecutive time if the Bank of England decides the economy is healthy enough for another cut.

The Bank’s governor Andrew Bailey will announce later this day whether its Monetary Policy Committee has decided on a reduction.

Analysts believe the rate may be cut by a further 0.25%, bringing the figure to 4.25%.

It marks another fall for the base rate after it peaked at 5.25% in autumn 2023 and stayed there until the following summer.

In the dramatic few years that followed the Covid lockdowns, the Bank increased interest rates 14 times in an effort to control inflation, causing alarm for homeowners.

If predictions of today’s decision are correct, it would mean repayments on many mortgages will fall – but it could also result in less welcome news for savers.

What would this mean for mortgages?

If you’ve got a tracker mortgage, meaning one that’s tied to the base rate decided by the Bank of England, your repayments would go down each month.

You may see a reduction if you have a standard variable rate (SVR) mortgage, too. Even though these deals are decided by your lender, they often also move according to the base rate.

However, you’ll have no such luck if you opted for a fixed-rate mortgage, since you’ve agreed to pay the same amount for a certain amount of time.

If you’re looking to remortgage, there’s a strong chance the new fixed rate will be higher than the one you were on originally, since the base rate is still close to its highest level for the past 15 years.

What would this mean for savings?

Savers have had a decent time in the past few months, when inflation was low but interest rates remained high.

That’s because banks tend to look at the base rate when deciding their own savings rates, and lower inflation meant people could stash more money away with a higher return.

But it’s likely that those rates will also fall if a reduction is announced later today.

So, now may be a good time to go hunting for some decent deals if you’re looking for somewhere to place your savings.

How has the interest rate changed over the last year?

This time last year, the Bank of England interest rate was at 5.25%- its highest point since the beginning of the financial crisis in 2007.

That only started to change in the summer, with a 0.25% reduction – the first cut in more than four years – coming in August.

The rate fell another 0.25% in November, as the Bank became increasingly confident that inflation was under control.

Bailey said the Bank would be taking a ‘gradual and careful approach to reducing rates further’ for the rest of 2025.

When is the next interest rate review?

After today, the next meeting of the Bank’s Monetary Policy Committee when the interest rate will be reviewed is June 19.

However, no change is guaranteed as the members may decide the keep the rate at the same level.

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