We've had a welcome cut to interest rates - but what next?

Greg Macvean Photography

This was the second rate cut since the start of the year and takes it to the lowest level since May 2023.

With many people struggling with household bills, this could bring some relief, particularly if the downward trajectory continues. But while a lower rate should make borrowing, including mortgages, more affordable, savers will not be feeling quite as cheery.

On the borrowing side, many lenders have responded to the Bank of England’s announcement by offering cheaper mortgage deals, which will be good for those coming to the end of current arrangements. Although those locked into longer-term deals will obviously see no change, and, of course, lenders aren’t forced to pass any or all of the rate cut to borrowers.

The next announcement on rates will come on19 June and the Bank is making no promises. It has said: “We must continue to monitor the economy and global events carefully when making rate decisions”.

And it added that, if inflationary pressures continue to ease, “we should be able to reduce interest rates further over time. But we can’t say precisely when or by how much. That depends on how the situation evolves.”

Factors it considers when making its decision include how fast prices are rising, how the UK’s economy is growing, and how many people are in work.

In terms of inflation, the Consumer Prices Index increased to 3.5 per cent last month from 2.6 per cent – well above the Bank’s target of 2 per cent – which may create further uncertainty over interest rate cuts.

In this edition of Scotsman Money, we analyse the findings of the wide-reaching Financial Lives Survey 2024 published by the Financial Conduct Authority in May. While some statistics show an improvement from its 2022 study - such as the number of “unbanked” people in Scotland falling from 3 per cent to 2 per cent - there is still room for improvement and financial exclusion remains an issue.

I therefore applaud any moves to educate young people on how to manage their finances from as early a stage as possible. So, it’s good to hear that Financial Inclusion for Scotland is planning a School Banking Pilot Project.

We also hear from Tom Ham of Calton, who is looking forward to a Big Sky Country this summer, from Waverton Wealth on how best to save for a comfortable retirement; and from Acumen Employee Benefits on navigating rising employer NIC costs.

If you have a personal finance question you would like answered email [email protected] and sign up for our Scotsman Money newsletter at www.scotsman.com/newsletter