The Bank of England has cut interest rates, taking the base rate to a new low of 0.25%. This is the first cut since March 2009, and how welcome it is will depend on your financial situation. The Bank also announced a new round of quantitative easing (QE) \u2013 pumping money into the economy to buy government bonds.
\nWhat does the cut mean for mortgages?
\nFor anyone with a fixed rate mortgage, the cut in interest rates will have no effect. But if you\u2019re borrowing is on a variable rate then it\u2019s likely to be good news. The borrowers that track the base rate will see their monthly repayments fall, probably from the start of September.
\nWhat does the cut mean for savers?
\nSavers have been suffering since the last interest rate cut and are likely to see returns fall further as a result of the bank\u2019s decision. According to financial information firm Moneyfacts \u201cSavings rates have already plummeted to record lows in recent weeks \u2013 continuing the downward spiral witnessed for several years now \u2013 and deals are being pulled from the market at an alarming rate, so a cut to interest rates is only going to increase savers’ pain.\u201d -04\/08\/2016
\nWill other types of borrowing be cheaper?
\nOverdrafts and credit card repayments will not be cheaper because of the base rate cut- the interest rates on these types of borrowing are separate to the Bank base rate and have been rising in recent months. According to the Bank, the average interest rate on a UK credit card is now 17.94%, compared with 15.73% in March 2009, while overdraft rates have gone up from 18.62% to 19.6%.
\nWill pensions be affected?
\nThe interest rate cut and sending more money into the markets by acquiring UK government bonds \u2013 a process known as quantitative easing \u2013 will hit pension funds. As a result of these measures, the price of government bonds, known as gilts, has gone up. Gilts have a fixed rate of return, so as their price rises investors get less income \u2013 a lower interest rate \u2013 for their money. Pension funds that offer a pay-out based on salaries usually invest heavily in gilts, and the lower return available means it will be difficult to meet their promises and deficits could grow. Also, Annuity pay-outs have already fallen, and are set to fall further if returns from gilts remain low. But there may be one advantage for savers further from retirement \u2013 QE could also boost share prices as investors take on more risk in search of returns; this could be good for anyone building up their pension.<\/p>\n","protected":false},"excerpt":{"rendered":"
The Bank of England has cut interest rates, taking the base rate to a new low of 0.25%. This is the first cut since March 2009, and how welcome it is will depend on your financial situation. The Bank also announced a new round of quantitative easing (QE) \u2013 pumping money into the economy to … Continue reading First UK interest cut in seven years<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-39","post","type-post","status-publish","format-standard","hentry","category-uncategorised"],"_links":{"self":[{"href":"https:\/\/tmam.co.uk\/blog\/wp-json\/wp\/v2\/posts\/39","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/tmam.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tmam.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tmam.co.uk\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/tmam.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=39"}],"version-history":[{"count":2,"href":"https:\/\/tmam.co.uk\/blog\/wp-json\/wp\/v2\/posts\/39\/revisions"}],"predecessor-version":[{"id":42,"href":"https:\/\/tmam.co.uk\/blog\/wp-json\/wp\/v2\/posts\/39\/revisions\/42"}],"wp:attachment":[{"href":"https:\/\/tmam.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=39"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tmam.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=39"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tmam.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=39"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}