The Bank of England is expected to cut interest rates from 4% to 3.75% at its Monetary Policy Committee meeting on Thursday, a move that will benefit mortgage holders but hit savers with lower returns on their cash accounts. Experts are urging savers to act quickly and secure better deals before rates fall further.
The anticipated cut follows data released Friday showing the UK economy contracted 0.1% in the three months to the end of October. Inflation has declined to 3.6% in October from 3.8% in September, giving the central bank room to ease monetary policy. Governor Andrew Bailey has not pushed back against expectations of a December cut.
Sanjay Raya, chief UK economist at Deutsche Bank, said: «We expect the BoE to deliver its final rate cut of the year – its sixth rate cut of the cycle.» He added: «Disinflation progress – for both prices and wages, combined with weaker growth, a disinflationary Budget, and a looser labour market – will likely be sufficient for a further dial down of restrictive policy.»
Impact on mortgage holders
The rate cut would provide relief to borrowers, particularly those on tracker and standard variable mortgages who will see automatic reductions. Around 81% of mortgage holders are on fixed-rate deals and must wait until their current terms end before benefiting from lower rates.
Hetal Mehta, Chief Economist at St James's Place, said: «This will be welcome news to borrowers and mortgage holders – especially at a time when the average mortgage rate on existing loans has continued to rise.» Many lenders have already begun reducing rates ahead of the expected decision, with current two-year fixed deals available around 3.5% for those with the highest deposits and equity.
Craig Fish, director at Lodestone Mortgages, predicted: «Over the coming weeks, I suspect that we will see many more reductions from a whole host of lenders.» With the base rate forecast to drop to 3% at some point in 2026, mortgage rates could fall below 3.51%.
Warning for savers
Savers face diminishing returns as the rate cut will immediately impact interest on cash ISAs and other savings accounts. Finance expert Rachel Springall warned that savers must act swiftly to secure higher-paying accounts.
She told The i Paper: «Easy-access accounts remain a haven for savers, as they are a great choice for an emergency fund. Those who use these for convenience do need to compare rates regularly, as they get hit when the base rate gets cut.»
Springall cautioned that loyalty to trusted banks often results in "shockingly low rates" that erode cash value through inflation. She said: «A few of the best deals carry bonus rates, so the responsibility is on the saver to be vigilant and switch before these expire. Savers may well prefer to open a savings account with a brand they trust, but such loyalty doesn't always pay.»
Best current deals
The highest easy-access savings rate currently available is 5% from Cahoot, while other competitive deals include 4.25% from Snoop, Manchester Building Society, Vanquis Bank and Dudley Building Society.
For cash ISAs, the best variable deals include Teachers Building Society at 4.30%, Plum at 4.28%, and Atom Bank at 4.25%. One-year fixed cash ISA deals peak at 4.3% from Tembo Money, Investec Save and Charter Savings Bank.
One-year fixed-rate savings accounts offer up to 4.51% from Kent Reliance, 4.5% from Investec Save, and 4.46% from LHV Bank.
Sarah Coles, head of personal finance at Hargreaves Lansdown, advised locking in good savings deals now, anticipating a downward trend in 2026. She said: «If you're happy with the rate and you don't need the money for this kind of period, then it can make a great deal of sense to get a longer fixed deal, so you know where you stand, whatever happens to rates.»
Note: This article was created with Artificial Intelligence (AI).
