Base rate cut by end of 2021 could see loan rates fall further

By Joel Stanier

The Bank of England opted against cutting the base rate to an unprecedented 0.25% this month - but many experts believe it will still happen in the near future.

According to Thisismoney.co.uk, the general consensus amongst experts is that the base rate will fall to 0.25% by December, and will stay there until January 2016.

That could mean good news for borrowers, who could benefit from even lower loans and mortgage rates - but not such good news for savers, who could see even lower returns on their money.

This is because financial institutions use the base rate to help decide the interest rates they offer consumers. The base rate is basically the rate at which banks can borrow money from the Bank of England - which is one way they fund things like loans and mortgages. So when the base rate falls, so do most loan and mortgage rates.

But at the same time, it also means savings providers must cut their interest rates. The Bank of England has already been criticised by many for helping borrowers more than savers, so it's safe to assume that a further cut won't be welcomed.

An expert at Think Money commented: "The whole idea of cutting the base rate is to make borrowing cheaper, which encourages more spending and therefore should help to boost the economy. It's great news if you want to take out a loan or mortgage, as your monthly payments will be cheaper.

"But savers will continue to struggle to get a good amount of interest. Savings accounts that lock your money away for a while will offer more interest than most other accounts, but still not as much as we've seen in past years."

Tags: Bank of England, loans, mortgages, base rate, borrowing, economy, savings

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