This would be the second interest rate cut of the year, following the previous reduction from 4.75% to 4.5% back in February.
The Bank of England sets the base rate approximately every six weeks. This rate plays a key role in shaping the interest rates that banks and lenders offer on mortgages and savings.
In most cases, a lower base rate leads to more competitive mortgage deals, which can benefit both homebuyers and those looking to move.
With markets expecting up to four rate cuts throughout the year, many lenders have already started lowering their mortgage rates, sparking a wave of competitive offers.
Many economists now predict that the base rate could drop by as much as 1% over the coming six months.
These expected reductions are likely to lower borrowing costs to below 3% — a level not seen since October 2022.
For context, during the financial crisis, interest rates were cut significantly, falling from 4.5% in October 2008 to just 0.5% by March 2009.
Barclays has also weighed in, forecasting that the base rate could fall to 3.5% by September this year.
Why do interest rates rise and fall?
The Bank of England started increasing interest rates towards the end of 2021 as a way to tackle rising inflation.
When interest rates are high, many people end up paying more on their mortgages and loans, which often leads to reduced spending on everyday items and services.
At the same time, savers tend to benefit, as higher interest rates mean better returns on savings accounts. This encourages more people to save rather than spend.
By slowing down consumer spending in this way, higher interest rates can help reduce inflation over time.
Lenders slash mortgage rates
With the expected base rate cuts already being factored in by the markets, many banks and lenders have taken early action by lowering their mortgage rates.
The UK’s six major lenders — Barclays, HSBC, NatWest, Halifax, Nationwide, and Santander — are now all offering fixed-rate mortgage deals below 4%.
In addition, several lenders made widespread rate reductions across their mortgage ranges last Friday.
HSBC, for example, cut some of its rates by as much as 0.25%. The bank also announced that all of its purchase and first-time buyer mortgage products are now priced below 5% — the first time this has happened since 2022.
Among its current offers, a two-year remortgage deal at 60% loan-to-value is now available at 3.89% for non-premier customers and 3.84% for premier customers, both with a £999 fee.
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