The Bank of England has surprised the markets this morning by announcing a reduction in base rate from 0.75% down to 0.25%.
The question is – will this 0.5% reduction really help consumers? – many are on fixed rate mortgages so won’t feel any financial benefit.
If your credit card provider is one that links your rate to base rate you will see cheaper borrowing costs but the impact will be minimal – 0.5% less on a £2000 credit card balance equates to just £10 savings in interest in a year – less than a pound a month.
It’s those with overdrafts that could do with some help – but with most banks charging around 40% interest, a 0.5% cut isn’t going to make any meaningful difference to peoples finances.
Savers will be holding their breath and hoping that the already pitiful rates they receive aren’t slashed further.