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THE BANK OF ENGLAND IS EXPECTED TO CUT INTEREST RATES FROM 4.75% TO 4.5% NEXT WEEK IN A MOVE THAT COULD HAVE WIDE-REACHING CONSEQUENCES FOR SAVERS, BORROWERS AND RETIREES 14:12, 01 Feb 2025
The Bank of England is anticipated to slash interest rates next week, potentially triggering a series of reductions throughout 2025. The bank is poised to lower them from 4.75% to 4.5%, a
move that could significantly impact savings, mortgages, and retirement plans. Markets are factoring in an 84% likelihood of a cut as policymakers react to decelerating economic growth and a
dip in inflation. Some financial experts, including a new member of the Bank of England's Monetary Policy Committee (MPC), suggest this could be the first of five or six quarter-point
cuts over the forthcoming 12 months to stave off a recession. While a rate cut may offer some respite to borrowers, experts caution that it could also exert pressure on savings rates, with
further cuts likely to be gradual and cautious due to rising prices and job losses. Homeowners hoping for immediate savings on mortgage payments might be left disappointed. READ MORE: HUGE
BENEFITS OVERHAUL WILL MEAN LONG-TERM SICK WILL NEED TO LOOK FOR JOBS Sarah Coles, head of personal finance at Hargreaves Lansdown, stated: "A rate cut has been on the cards ever since
inflation fell in December, but it won't be a game-changer overnight." "Fixed-rate mortgage holders won't see any sudden drop, as the market has already priced this in.
The average two-year fixed mortgage has actually crept up slightly, from 5.48% to 5.52% this year.", reports the Express. However, she added that as long as inflation remains under
control, rates should trend downwards over time, which could alleviate financial pressures on millions of mortgage holders. For savers, a rate cut could mean that banks and building
societies may reduce interest rates on easy-access accounts as they adjust to a lower base rate. Mark Hicks, head of Active Savings at Hargreaves Lansdown, suggests some cuts are already
being factored in. "The easy access market will come under pressure, while fixed-term accounts should stay steady. Cash ISAs remain competitive, with many providers still paying around
5%, but if the market expects deeper cuts, those rates may not last," he said. . For retirees considering an annuity, there's good news - payouts are still near record highs. Helen
Morrissey, head of retirement analysis at Hargreaves Lansdown, said: "A 65 year old with a £100,000 pension can still secure up to £7,492 per year from a single-life level annuity -
just shy of all-time highs. Even with a rate cut on the horizon, annuities remain attractive." She advised pensioners to shop around before locking in a deal, as different providers
offer varying rates. While the expected rate cut is aimed at boosting growth, concerns remain over rising business costs, potential stagflation, and employment uncertainty. Susannah
Streeter, head of money and markets at Hargreaves Lansdown, warned that businesses are already raising prices due to higher National Insurance contributions demanded of them in the Budget,
and private sector job cuts are at their highest level since the pandemic. Article continues below She remarked: "The economy is stagnating while inflation pressures still lurk. That
means the Bank of England may move cautiously on further cuts, despite financial markets predicting at least two more this year." This contrasts with recent forecasts from Morgan
Stanley and Goldman Sachs, which anticipate five to six rate cuts. The Bank of England's upcoming decision will be pivotal for the economic outlook in 2025, especially with the cost of
living crisis persisting. Observers are keenly awaiting to see the pace at which borrowing costs will be reduced.