A Bank of England interest rate cut is highly likely next week following the UK economy’s consecutive contraction for the second month, according to experts. Concerns over potential tax increases in the upcoming Budget by Chancellor Rachel Reeves dampened both consumer and business spending, leading to a 0.1% decline in economic output in October, contrary to expectations of growth. This downturn marks the fourth consecutive month without economic expansion, with gross domestic product stagnant or falling since June.

With the recent economic data, economists are increasingly convinced that the Bank of England will lower its base rate from the current 4% during the Monetary Policy Committee meeting next week. Neil Wilson, UK investment strategist at Saxo Markets, confidently stated that a rate cut next week is a certainty, projecting additional cuts in 2026. Lindsay James from Quilter echoed a similar sentiment, indicating that a rate reduction next week is becoming more probable.

Predictions suggest that Bank of England Governor Andrew Bailey will likely shift his vote towards a base rate cut at the upcoming meeting, potentially resulting in a narrow majority in favor of the decrease. The TUC General Secretary, Paul Nowak, emphasized the necessity for interest rate cuts to address the financial strain on families and businesses amid the ongoing living standards crisis.

For borrowers, a projected rate cut to 3.75% would offer further advantages, particularly in the mortgage sector. Lenders have already initiated rate reductions on fixed-rate mortgage products in anticipation of the base rate cut, with major institutions like NatWest and Barclays leading the trend. Borrowers with variable rate mortgages, including standard variable rate (SVR) and discounted or tracker deals, stand to benefit from the upcoming rate adjustment.

On the other hand, savers are advised to take action promptly to secure favorable deposit rates before potential changes following the expected base rate cut. Experts recommend considering fixed-term savings accounts to lock in higher rates, amid indications of declining interest rates. Diversifying funds across various account types is advised, with a focus on easy-access accounts for flexibility and fixed-rate ISAs for stable long-term returns. Additionally, reviewing ISA allowances and maximizing current limits is recommended before potential changes take effect.