No Change to Interest Rates, But a Cut Could Be Coming: Impact on Mortgages and Savings

Interest Rates Held at 4.25% — But With Three Votes for a Cut: What It Means for Your Mortgage and Savings

The Bank of England has held interest rates steady at 4.25%, maintaining its cautious stance amid mixed signals in the economy. But this time, the vote wasn’t unanimous — three members of the Monetary Policy Committee (MPC) voted in favour of a cut. It's the clearest sign yet that change could be coming. So, what does this mean for your mortgage, your savings, and your next financial decisions?

A Split Decision: Why It Matters

Out of the nine MPC members, three supported a cut — a marked shift from previous meetings where holding rates had unanimous or near-unanimous support. This division signals growing confidence that inflation is coming under control, and that the time to ease the pressure on households and businesses may be approaching.

While the majority still believe that it's too early to cut, the tide could be turning — possibly as early as the next MPC meeting.

What This Means for Your Mortgage

1. Tracker and Variable Rate Mortgages

If you’re on a tracker mortgage tied to the Bank of England base rate, you won’t see a change in your payments just yet — but a cut could be coming. Even though rates haven’t dropped, lenders may begin to price in future cuts into their products.

For standard variable rate (SVR) mortgages, your rate is set by the lender but influenced by the base rate. Expect no immediate change, but if rate cuts become more likely, you may benefit later in the year.

2. Fixed-Rate Mortgages

If you're coming off a fixed-rate deal, this is a crucial time. Lenders are already starting to reduce the cost of new fixed-rate deals in anticipation of cuts later this year. So, remortgaging now could lock in a better deal than was available a few months ago — but there may still be more reductions to come.

Tip: If you’re within 6 months of the end of your fixed deal, it’s worth talking to a broker now.

What About Your Savings?

For savers, high interest rates have been a rare upside in recent years. However, the signs now point towards a downward trend — so those with cash in high-interest savings accounts or ISAs should consider locking in fixed-term rates sooner rather than later.

Key Considerations:

• Easy-access accounts may start dropping rates faster than fixed-term ones.

• Fixed-rate bonds or ISAs could help preserve returns if cuts materialise.

• Look out for promotional rates as banks compete to attract funds before rates fall.

What’s Next?

The fact that a third of the MPC is now calling for a cut is significant. Markets are now pricing in a higher probability of a rate cut in the coming months, possibly as early as the next meeting. The direction is clear: unless inflation rebounds unexpectedly, interest rates are likely to begin falling by the end of the year.

 Takeaways

• Mortgages: If you’re remortgaging or about to buy, keep a close eye on rates — they may start drifting downward, but don’t expect dramatic cuts just yet.

• Savings: Consider fixing now to protect your returns before rates begin to fall.

• Planning: Stay informed — the next MPC meeting could be pivotal.

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About the author:

Raj is a seasoned investment advisor with over a decade of experience in the offshore market, specialising in prime off-plan property developments across the UK. His broad expertise spans a variety of asset classes, yet it is his self-admitted passion for property that has refined his ability to spot exceptional developments and prime locations. Having lived and worked in diverse locations around the globe, Raj now enjoys the relaxed Mediterranean lifestyle on the coast of Southern Spain, where he resides with his wife. His global perspective and keen eye for investment opportunities make him an invaluable resource for expat clients.