What will the drop in interest rate mean for personal finances?

UK interest rates have been cut from 0.5% to 0.25% and the Bank of England has signalled that rates could go lower should the economy worsen.

The Bank announced a range of measures in order to stimulate the UK economy, including a £100bn scheme to force banks to pass on the lower interest rate to households and businesses.

The governor of the Bank of England has said that banks have “no excuse” not to pass on the lower borrowing costs to customers and will be charged a penalty if they do not.

There are 1.5 million tracker mortgages in the UK and the 0.25% interest rate means that a typical mortgage will be £22 a month cheaper though savers will feel the brunt of the drop in interest. £10,000 in savings will now accrue gross interest of £440 a year and net interest will be lower for taxpayers.

The Bank of England does not foresee a recession due to the measures (including the drop in interest rate) that it has put in place but unemployment could rise by a small amount for the next few years.

To read more about this you can see a report on the BBC website.

If you are in any doubt about what this will mean for you or you need further advice on your mortgage or savings then contact your financial advisor.