Bank of England cuts base rate to 4.75% – what this means for your savings

Today, the Bank of England’s Monetary Policy Committee (MPC) voted to reduce the base rate by 25 basis points to 4.75%, marking a second rate cut this year. This move was expected, with 88% of financial advisers correctly forecasting a decrease.

The decision within the MPC was not unanimous, ending in an 8-1 vote split, with one member (Catherine Mann) preferring to hold the base rate at 5%.

What drove today’s decision?

The MPC’s choice to lower the base rate comes as UK inflation dropped to 1.7% in September, falling below the Bank’s 2% target for the first time in nearly three years. Inflation had soared as high as 11.1% in October 2022, its highest level in a generation, but has steadily cooled. While inflation could rise modestly in the months ahead, most indicators signal that price pressures have eased, giving the Bank of England room to loosen monetary policy.

Commenting on today’s decision, Governor Andrew Bailey said: ‘We need to make sure inflation stays close to target, so we can't cut interest rates too quickly or by too much. But if the economy evolves as we expect, it's likely that interest rates will continue to fall gradually from here.’

How this affects your savings

While savings rates have edged down from recent highs, the current environment is still favourable for savers. Here's what you need to know to keep making the most of your money:

1. Inflation remains a factor to watch

Despite inflation’s recent drop, certain drivers still warrant close attention. Rising energy costs could push inflation back up, with some economists projecting it could reach 2.5% by year-end.

There’s also speculation that Rachel Reeves’s Autumn Budget will add to inflation, prompting the Bank of England to consider a slower path to rate cuts.

Savers should keep an eye on these potential increases to ensure their savings rates continue to outpace inflation.

2. Further rate cuts may be on the horizon

With only one more MPC meeting scheduled on 19 December, there’s a chance the base rate could drop to 4.5% by year-end. In this environment, banks are likely to reduce their top savings rates. Locking in a high rate now could be worth considering for those looking to increase the returns on their savings.

Simon Merchant, CEO & Co-Founder of Flagstone comments:

‘In a falling rate environment, diversifying your savings by term length is a good choice – and using a savings platform is a particularly efficient way to ensure maximum diversification. It provides reliable liquidity without impinging on your capacity to capitalise on the relentless competition among banks to stay at the top of the best-buy tables.’

3. Now’s the time to secure the best rates

Some banks and building societies have already removed their best savings offers since the August cut. For savers who can set aside funds for a longer period, Fixed Term accounts can offer better returns – shielding you from future rate cuts. Knowing the exact rate over a set period allows you to plan more effectively and forecast returns with certainty.

The next six weeks present a key window to make the most of current high-interest rates. Our recent savings inertia report shows that too few savers are moving their money to optimise their returns, meaning many are missing out on favourable rates that might soon disappear.

View our top rates

What happens next?

There’s just one more MPC meeting left in 2024, with mixed opinions on whether another rate cut is likely in December. Savers can prepare for potential changes by shifting funds into accounts offering the best rates available now – before any further reductions.

If you’re looking for a simple way to manage and grow your cash for optimal returns, our cash-deposit platform offers the solution. With a single login, unlock access to a smorgasbord of savings options – hundreds of accounts from 60+ banks.

Calculate your potential interest earnings now