Interest rates to fall

In the immediate fall-out after the Brexit vote it was rumoured that interest rates would fall when the Bank of England Monetary Policy Committee (MPC) met on the 13th July. Following the meeting, Mark Carney announced that interest rates would be held at 0.5{11092aa1eab99d85b02efc0ee3c04dc4f5b81bebfc2bd8f608402c1b0eb15b7e}.

However, the minutes of the July 13th MPC meeting make it clear that at their next meeting on the 6th August, interest rate reductions or other easing of monetary policy may be on the cards. The minutes say:

“The MPC is committed to taking whatever action is needed to support growth and to return inflation to the target over an appropriate horizon. To that end, most members of the Committee expect monetary policy to be loosened in August. The Committee discussed various easing options and combinations thereof. The exact extent of any additional stimulus measures will be based on the committee’s updated forecast, and their composition will take account of any interactions with the financial system.”

In other words, the expected fall in rates to say 0.25{11092aa1eab99d85b02efc0ee3c04dc4f5b81bebfc2bd8f608402c1b0eb15b7e}, may well happen next month.

If rates do fall this is great news for borrowers, who can expect fixed rate mortgages to be offered at more favourable rates.

It will be bad news for savers. In fact, as the indications of a rate fall are fairly strong, it may pay to take advice and consider your options. National Savings and the High Street banks are already adjusting rates in a downward direction in anticipation of rate falls next month. Perhaps time to take a look at fixed-rate savings bonds?

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