27/08/2024
Is that some light at the end of the tunnel?
The Bank of England announced its decision to reduce the Base Rate to 5% at the start of August, which was the first cut in four years, after holding them at 5.25% seven times in a row. Home owners are finally feeling the benefit.
Interest rates affect the mortgage, credit card and savings rates for millions of people across the UK. This is the first drop in rates since March 2020 when the UK entered the first Covid lockdown - but borrowing costs are still high.
When will UK interest rates go down further?
The current Bank rate is 5%, having spent many months at 5.25% - the highest level for 16 years. However, it was significantly above this for much of the 1980s and 1990s, hitting 17% in November 1979. Inflation is now far below its peak of 11.1% in October 2022. While the main inflation measure, CPI, ticked up slightly to 2.2% in the year to July, an increase was widely expected and prices are still rising at a slower rate than in 2022 and 2023.
In May, the International Monetary Fund (IMF) recommended that UK interest rates should fall to 3.5% by the end of 2025. The organisation, which advises its members on how to improve their economies, acknowledged that the Bank had to balance the risk of not cutting too quickly before inflation is under control.
