He says people with mortgages, savings accounts, loans and credit card will be affected
Martin Lewis, founder of Money Saving Expert and financial journalist, has revealed the four ways the Bank of England’s announcement of reduced interest rates will affect British people. The Bank of England announced today a cut on interest rates – they now stand at 4.25%, down from 4.5%.
The announcement was made on Thursday, May 8. The interest rate cut is the fourth rate reduction since last year’s peak of 5.25% and is the second drop this year. It will mean that borrowing money by businesses and individuals is less expensive but there are likely to be lower returns for savers.
Martin Lewis took to X (formerly Twitter) to tell his 3.1 million followers that the main things that will be affected are their mortgages, credit cards, loans and savings. For our free daily briefing on the biggest issues facing the nation, sign up to the Wales Matters newsletter here.
Martin Lewis said: “The UK Bank of England base rate has again been cut, now from 4.5% to 4.25% Five of nine voted for this cut, two to keep it on hold, two for a bigger 0.5% cut.
Read more: What the interest rate cut means if you have a mortgage, loan, or savings
Read more: Four conditions that will avoid PIP payment cuts, DWP expert claims
“More cuts are expected across 2025, some analysts say down to 3% by the year end, though bank saying it’ll be done gradually. This is what it means for mortgages, savings, cards & loans.”
Mortgages
Martin says: “If fixed, no change until your fix ends. The rate of new fixes may drop a tad, but this cut was expected so has mostly already been factored in. – If on tracker rate will drop 0.25% points – If variable it should drop by around that but it doesn’t have to be exact amount. Usually takes up to a month to come in. – The reduction is equivalent to £15 lower repayments per month per £100,000 of mortgage.
Savings
Martin says: “Variable rate savings (which is mainly easy access accounts) will likely drop within a two to four weeks by 0.25%. And I hear we’ll therefore probably see the last of the over 5% cash ISA rates (see best buys on MoneySavingExpert). Fix rate savings have already factored in some of this cut. Though they may shave down further. If you want to fix your savings, safest bet is do it today.
Credit cards
Martin says: “Mostly unaffected, they’re already so high above the base rate with typical APRs now 24.9% . Though it may see slightly longer 0% deals launched.”
Loans
Martin says: “Existing loans are unaffected as they’re usually fixed rates. New loans are set based more on interest rate forecasts than base rate moves. Expect the cheapest new loan rates to shave down very marginally.”
The MPC is a group within the Bank of England consisting of nine members, including the governor of the Bank of England, deputy governors, and other experts in economics and finance.
They meet around eight times a year to review the UK’s economic situation and decide whether to change the bank rate.
According to Martin Lewis, analysts have predicted that interest rates could be cut down to 3% by next year.
