UK interest rates cut to 4.25%
Predictable decision reflects pragmatic approach amid global economic uncertainties – with significant implications for UK households.
8th May 2025 12:04
by Myron Jobson from interactive investor
Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The Bank of England’s decision to trim interest rates was as predictable as the tide, reflecting a pragmatic approach amid lingering global economic uncertainties - not least the knock-on effects of Donald Trump’s ongoing trade war.
“Despite the UK economy growing more than predicted in February (latest data available), policymakers remain laser-focused on bolstering domestic momentum. The latest rate cut signals a bid to turbocharge GDP growth, ensuring the UK can weather external headwinds while fostering a more resilient economic outlook.”
What it means for mortgages and savings
“The Bank of England’s decision to cut interest rates, while aimed at supporting the broader economy amid global uncertainties, has significant implications for households. For those with variable-rate mortgages or tracker deals, the move is likely to offer some immediate relief, as monthly repayments could dip slightly, easing pressure on stretched budgets.
“For would-be homebuyers, lower interest rates can be a double-edged sword. On one hand, it should make borrowing cheaper, potentially reducing monthly payments and improving mortgage affordability tests. On the other, it may fuel further competition in the housing market, potentially pushing property prices even higher, adding to the affordability challenge.
“For savers, the outlook is less rosy. Lower interest rates typically mean lower savings rates. Those who can afford to lock away their money for at least five years or more should consider investing for the potential of long-term, inflation-beating returns that far outstrip current savings rates.
“Ultimately, while a cut can provide a welcome buffer for borrowers, it underscores the importance of carefully weighing long-term financial plans, especially in an uncertain economic climate.”
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