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What does the latest interest rate decision mean for financial advisers? 

5 mins read
by Rachel Carey
Last updated November 12, 2024

The base rate plays a fundamental role in financial decision-making, so discover what the latest news means and what is predicted to happen next.   

Summary

  • On 7 November, the Bank of England cut the base rate from 5% to 4.75%. 
  • Mortgages, savings, annuities, and investments are likely some of the top concerns for consumers following the base rate cut.
  • The last Bank of England announcement of 2024 is scheduled for 19 December, with the fallout from the Autumn Budget and the US election likely to impact its decision.

On 7 November, the Bank of England (BoE) cut the base rate from 5% to 4.75%. This followed a hold in September and a cut from 5.25% to 5% in August.  

In September, UK inflation fell more than expected, from 2.2% to 1.7%, the lowest rate in over three years.  

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What questions will clients have following the recent rate cut? 

It’s likely financial advisers, mortgage brokers, and accountants nationwide are fielding questions from clients about the impact the latest base rate cut will have on their finances.  

Some of the top concerns clients and potential clients might have include: 

What will happen to my mortgage rate? 

Mortgage rates are a mixed bag depending on where you are in your homebuying journey.  

  • Fixed-rate mortgages: Fixed mortgage rates have risen or been withdrawn following the Autumn Budget, which is a blow for homeowners and those looking to get on the property ladder. According to Rightmove, the average five-year fixed-rate mortgage rate is currently 4.7%.  
  • Variable-rate mortgages: A lower base rate often means lower rates, meaning those with a variable-rate mortgage could enjoy lower monthly repayments.  

How can I make sure I get the best savings rate? 

If your clients want the best savings rate, they need to act fast.  

Saving rates have been declining since their peak at the end of 2023, with this latest cut likely meaning further falls.  

Top savings rates currently stand around 5% for fixed-term and notice savings accounts. If clients want to take advantage of these rates, it’s a good idea for them to open an account and lock in the rate before it drops. 

Will the latest cut impact my annuity? 

Annuity rates are linked to the base rate, with any cuts typically having a negative impact.  

However, following August’s base rate, annuity rates only experienced a slight fall. As they have held steady, this hold cannot be guaranteed, meaning a client who is considering an annuity should act quickly.  

Should I reevaluate my investment portfolio? 

It’s always a good idea to evaluate any portfolios regularly and see how the investments are performing. This is something you can do with your client, if they have opted for this. 

But it's important for clients to remember that interest rates are just one factor to consider, and basing any decisions on this alone isn’t recommended.  

Ideally, you should be reevaluating clients’ portfolios regularly to ensure they have a diverse mix of investments geared towards their goals.  

What will happen to interest rates next? 

The next BoE meeting will take place on Thursday 19 December.  

While many believe the BoE will likely issue a hold on rates at the next meeting in December, some remain optimistic about back-to-back cuts.  

While BoE governor Andrew Bailey told the BBC rates were likely to ‘continue to fall gradually from here,’ he also warned this would not happen too quickly or by too much, pointing to the ‘risks out there in the world at large and also domestically.’ 

Two big events that will both impact rates have occurred in the last two weeks: the Autumn Budget and the US Presidential election.  

During Labour's first Budget in 14 years, chancellor Rachel Reeves announced a slew of changes aimed at filling the £22 billion financial ‘black hole.’  These changes, while aimed to boost growth, will push prices up at a faster rate, with the BoE warning it of a fresh spike in inflation. 

Meanwhile, the election of President Donald Trump for a second term has put the American Federal Reserve on a ‘slower and shallower path for interest rate cuts’ according to Reuters.  

This will impact what happens here in the UK, as the BoE often considers what’s happening over the pond when deciding the base rate.   

The announcement on 19 December will be the last in 2024, with the first of 2025 scheduled for Thursday 6 February.  

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How can advisers stay ahead?  

During times of change and market uncertainty, there are several things financial advisers, mortgage brokers, and accountants can do to stay ahead, including: 

  • Stay informed: Keeping up to date with all the latest developments, including government announcements and their implications, will allow you to act as soon as news breaks.  
  • Think ahead: While no one can predict the future, experts often give their opinion on what they think will happen in the market. So, you can plan for various scenarios, ensuring you’re prepared for whatever comes down the line. 
  • Be proactive: When there is a big change, such as interest rates or the Budget, your clients will likely have multiple questions and concerns. To put their minds at ease and show them you’re on top of it, schedule post-announcement meetings so you can talk them through the changes. You could even schedule an email to your clients with the latest changes broken down and how they can get in touch with questions.  

By taking some simple steps, you can ensure you’re ready to navigate the changing financial landscape and provide your clients with the right financial advice.  

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Author
Rachel Carey
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.