Rate cut next week appears all-but nailed on

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Inflation has a slow leak, and is gradually losing altitude, so figures next week are expected to come in lower.

“Coupled with weakness in the employment market and sluggish economic growth, the stage is set for a rate cut on Thursday.

“GDP figures this week are expected to confirm that economic growth remains incredibly slow.

“This will come on the back of barely-there growth of 0.1 per cent in the three months to September.

“Meanwhile unemployment at 5 per cent is back to the kind of levels we saw during the pandemic bump.

“Prior to that, it hadn’t been so high since the middle of 2016. It all points to monetary policy easing.

“The risks of sticky inflation have fallen and the risks from weaker demand have grown, so if inflation continues to fall, the Bank of England says there could be more cuts in the coming months.

“However, it points out that the risks are relatively balanced. It means rate movements will be slow and small so we might only see rates fall to around 3.25 per cent by the end of the year.

“Savings rates will tend to follow the Bank of England, all things being equal, and it seems likely they will trend downwards in 2026.

“However, there’s a huge amount of competition in the savings market, as providers push for market share.

“Rates have stayed relatively steady and robust, despite the expected rate cut, and you can still make more than 4 per cent.

“There are some particularly competitive deals available from online banks and savings platforms, so it’s well worth checking out what’s on offer if you haven’t switched for a while.

“Both easy access rates and fixed terms have risen in the past two weeks on our Active Savings platform as competition heats up.

“Cash ISA rates are also still relatively robust. Savers have flooded into the product over concerns that the Cash ISA limit could be cut.

“Now we have had confirmation that this will happen in 2027, we will see more people taking advantage this tax year and next.

“Banks and building societies may also want to fill their coffers while they can.

“Neither of these things are going to cancel out the impact of the Bank of England cuts entirely, but they are likely to make savings rate cuts a bit slower.

“The deals available on the one-year fixed market are very close to those in the easy access market, but if you lock in a rate for a year, you’re likely to see easy access rates fall behind.

“If you don’t need access to your money, it’s worth considering. Fixing for longer will mean you get a slightly lower rate, because more cuts are factored in.

“However, if rates fall, you could be grateful for securing a longer-term deal.

“The difficulty is that the longer you fix for, the harder it is to forecast what might happen to rates in general, so there are no guarantees you will be better off.

“It means you’re not fixing to be certain of beating a variable rate, you’re fixing for the certainty of knowing what you will get.

“If you’re happy with the rate and you don’t need the money for this kind of period, then it can make a great deal of sense to get a longer fixed deal, so you know where you stand whatever happens to rates.

“It’s not an all-or-nothing choice though. Most people will end up with a mixture of easy access savings for emergencies, plus chunks of cash fixed for the periods that suit their needs.”