Bank of England cuts interest rates to 4% – live updates

Michael Race
Business and economics reporter

In
short – it means you won’t get as big a return on your savings.

Interest
rates are used as a tool to combat inflation. The theory behind raising them is
to somewhat encourage people to spend less – it’s why borrowing becomes more
expensive.

But higher rates also means savings rates increase.

Savings
rates have been trending downwards for some time given the past cuts in
interests rates by the Bank of England. According to financial information company Moneyfacts, average savings
rates on an easy access ISA are 2.9%.

Mark
Hicks, head of active savings at Hargreaves Lansdown, suggests people should
check what rates they are getting.

He says because further rate cuts could
come down the line the future, fixed deals on savings accounts are worth
considering, so people can secure “today’s strong rates”.

There’s been a lot of chatter
on savings in recent months. The chancellor shelved any immediate plans to make
changes to cash ISAs , which
allow savers to
put away up to £20,000 a year tax free.

Rachel Reeves was thought to be considering reducing the
allowance for tax-free cash savings, in a bid to encourage people to put money
into stocks and shares instead and boost the economy.

But
it was met with strong opposition from banks, building societies and consumer campaigners.