American Invest Hub
  • Politics
  • Investing
  • Business
  • Latest News

American Invest Hub

  • Politics
  • Investing
  • Business
  • Latest News
Latest News

BOE rate cuts offer little relief as UK households face mounting financial strain

by admin August 3, 2025
August 3, 2025
BOE rate cuts offer little relief as UK households face mounting financial strain

One year into the Bank of England’s interest rate cutting cycle, UK households are yet to see meaningful financial relief.

Despite four rate reductions since July 2024 and expectations for a fifth this week, the overall burden on consumers has grown, underscoring the complexity of easing monetary policy amid lingering inflation and structural economic challenges.

Savings suffer as rate cuts outpace mortgage relief

Bloomberg analysis of Bank of England data shows British households are collectively £11 billion ($14.5 billion) worse off on an annual basis compared to a year ago.

The disparity stems from the fact that while banks and building societies quickly slashed interest rates on customer deposits, the benefits of lower mortgage rates have been slow to materialize.

Falling savings returns have cost households nearly £5 billion over the past year, affecting a wide range of accounts, including tax-free ISAs and various deposit types.

The effective interest rate on time deposits has declined by 0.4 percentage points since July 2024, while sight deposits have dropped 0.2 points — all amid a savings pool totaling around £1.8 trillion.

In contrast, mortgage and unsecured loan costs have increased by £6 billion annually.

Many homeowners are still locked into deals agreed at higher interest rates, with roughly one million borrowers currently paying above prevailing rates.

The Bank estimates these individuals may not benefit from cheaper borrowing until their current terms expire, a lag that could stretch over the next two years.

Persistent cost pressure despite easing cycle

The Bank of England’s benchmark rate stood at 5.25% in July 2024 — the highest level since the global financial crisis.

While the central bank has since lowered rates to 4.25%, and is expected to trim another 25 basis points to 4% this Thursday, the impact on financial conditions remains limited.

Consumers — who drive approximately 60% of the UK economy — appear cautious.

According to research group GfK, the UK’s savings index jumped in July to its highest reading since 2007, reflecting rising preferences for saving over spending.

This trend is compounded by fears of future tax increases following the fiscal measures introduced by Chancellor Rachel Reeves in April.

Economists note that the slow pace of rate reductions, coupled with their delayed transmission into real-world borrowing costs, blunts the intended stimulus.

ING’s James Smith commented that “the impact of rate cuts is going to be very gradual,” particularly in an environment of glacial policy easing.

Inflation and policy uncertainty cloud outlook

Adding to the challenge, inflation remains a pressing concern. Prices in July rose at a 17-month high — exceeding the BOE’s May forecasts — driven in part by energy costs and other one-off factors.

While these may not reflect persistent inflationary pressure, policymakers remain wary of secondary effects, particularly wage increases that could prolong price instability.

The effective interest rate on Britain’s £1.7 trillion mortgage stock has actually risen by nearly 0.2 percentage points over the past year, despite the central bank’s easing efforts.

That discrepancy illustrates how the legacy of past rate hikes continues to weigh on households.

Looking ahead, markets and analysts expect the BOE to continue its current pace of one rate cut per quarter, bringing the policy rate down to around 3.5% by spring 2026.

But with inflation still elevated and consumer sentiment subdued, the monetary policy path may offer limited short-term relief for struggling households.

The post BOE rate cuts offer little relief as UK households face mounting financial strain appeared first on Invezz

0
FacebookTwitterGoogle +Pinterest
previous post
Retail investors shift focus to Europe as US valuations stretch
next post
Trump moves nuclear submarines near Russia: what triggered the move and what’s ahead

Related Posts

Venezuela strongman Nicolas Maduro reelected as president, election authorities...

July 29, 2024

African cities sitting on ‘keg of gunpowder’ asgrowing...

July 30, 2024

More than 500 dead seabirds wash up on...

March 9, 2024

Huge waves and high winds hurl jellyfish and...

February 8, 2024

Seven men arrested in India for alleged gang-rape...

March 6, 2024

Leading Gaza surgeon Adnan Al-Bursh dies in Israeli prison

May 4, 2024

Shehbaz Sharif elected Pakistani prime minister for a...

March 4, 2024

Interview: Diversifying into commodities mitigates risks amid global...

February 10, 2025

Russian oil refinery partially suspends operations after drone...

April 28, 2024

Gautam Adani responds to US bribery allegations: ‘Negativity...

December 1, 2024

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Latest News

    • Why is Spain’s economy doing well?

      August 23, 2025
    • India proposes 3-year steel import tariff to counter China

      August 18, 2025
    • Soho House to go private in $2.7B deal led by MCR Hotels

      August 18, 2025
    • As Zelenskiy heads to face Trump, allies hold crisis talks over forced-deal fears

      August 17, 2025
    • US tariffs push India away from Russian oil, bolstering Iraq’s position in Asia

      August 10, 2025

    Categories

    • Business (3,742)
    • Investing (2,766)
    • Latest News (2,040)
    • Politics (1,530)
    • About us
    • Contact us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: americaninvesthub.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 americaninvesthub.com | All Rights Reserved