Money Wellness
Illustration of a couple being weighed down by a house
category iconcost of living
calendar icon09 May 2024

When will interest rates come down and will it help me?

The Bank of England has announced it’s keeping the interest rate at 5.25% - the highest level for 16 years.

Andrew Bailey, the Bank’s governor, says there needs to be more evidence of falling inflation before a cut.

This is the sixth time in a row the rate has been held.

Inflation has fallen to 3.2% - down from a high of 11.1% in October 2022 - but that’s still too far above its 2% target for the Bank’s liking.

By keeping the interest rate high, it’s hoped inflation will fall further as it will make borrowing more expensive.

When it’s expensive to borrow, we generally spend less. In turn, retailers tend to cut prices in a bid to tempt us to part with our money.

What does this mean for you?

Today’s announcement is bad news if you’re one of the 1.2 million people on standard variable rate or tracker mortgages hoping to see a drop in their payments.

It’s also not great if you’re coming to the end of a fixed-rate mortgage deal and were hoping to see an improvement in the new offers available to you.

Paying higher interest on a range of services also means you’re likely to have less money to spend on non-essentials.

Our director of external relations, Seb McCullough, said:

“Today’s decision to hold interest rates will be a blow to homeowners holding out hope that their repayments would start to fall.

“We’ve already seen a 25% rise in mortgage arrears this year. With embattled homeowners struggling with mortgage payments increasing from 24% to 45% of net take-home pay since December 2022.

“Despite green shoots, the cost-of-living crisis is far from over. Household budgets remain stretched, with expenses at historical highs.

“Homeowners coming off fixed rate deals this year who think they might struggle with increased payments should seek support from their providers as soon as possible. There is help available.”

When will the interest rate fall

Commentators are suggesting it might be August or September before interest rates fall, given that the Bank wants to see concrete evidence that inflation is still moving in the right direction.

How will falling interest rates affect me?

When interest rates fall, as well as affecting mortgages, it will also have an impact on the interest charged on many credit cards, bank loans and car loans. If you pay less interest, this should mean your money goes further.

Avatar of Rebecca Routledge

Rebecca Routledge

A qualified journalist for over 15 years with a background in financial services. Rebecca is Money Wellness’s consumer champion, helping you improve your financial wellbeing by providing information on everything from income maximisation to budgeting and saving tips.

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