Interest rates UK – latest: Lenders cut mortgage rates as banks urged to take action

Not all heroes wear capes; some are just very good at spreadsheets. As the cost of living crisis worsens, Martin Lewis has been hailed as a national hero for his advice on how to save cash.

But how much of a difference can his tips really make?

Our lifestyle reporters Laura Hampson, Saman Javed and Kate Ng have investigated whether the consumer champion’s advice on everything from train tickets to groceries made a difference to their individual bank balances:

Millions of Britons unable to manage without disability benefits could see their support slashed if the government diverts to a means-tested system.

Regardless of income, beneficiaries can currently claim up to £627 in Personal Independence Payment (PIP) or £369 in Attendance Allowance per month.

Chancellor Jeremy Hunt warned on Thursday that there were “difficult decisions” ahead as the government seeks to “restore stability” after interest rates were bumped to their highest point since the 1980s.

Read our full report here:

Several high street banks have slashed mortgage rates after Bank of England governor Andrew Bailey told lenders that costs did “not need to rise as they have done”.

Alongside a handful of smaller lenders, Halifax and Virgin Money were among the first to announce mortgage rate reductions on Friday, despite the largest jump in interest rates in 33 years.

Lending giant Halifax has said it would reduce several remortgage rates by up to 0.24 per cent from next week, with rates now starting below the 6 per cent threshold

Clydesdale Bank, an arm of Virgin Money, has also cut rates on its two and five-year mortgages by up to 0.3 percentage points, which will push some rates down to 5.44 per cent.

The Bank of England announced this week that it was raising interest rates to 3 per cent - the biggest hike in the base rate since 1989.

Andrew Bailey, the central bank’s governor, said officials had no choice but to increase interest levels by 0.75 per cent to tackle soaring inflation, currently running at 10.1 per cent.

The move will have a knock-on effect on savers and anyone who wants to borrow money, as well as impacting mortgage costs.

Matt Mathers reports:

House prices in the UK have fallen for the first time since July 2021, after Liz Truss and Kwasi Kwarteng’s mini-Budget sent the markets reeling, new data reveals.

According to Nationwide, the average house price in October was £268,282, a £3,977 (0.9 per cent) drop on September.

The bank also noted the biggest decrease in prices since June 2020, suggesting the UK is now subject to the decline predicted after last month’s financial turmoil.

Robert Gardner, Nationwide’s chief economist, said: “The market has undoubtedly been impacted by the turmoil following the mini-Budget, which led to a sharp rise in market interest rates.

“Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation.”

The market looks set to slow in the coming quarters. Inflation will remain high for some time yet and [the base rate] is likely to rise further as the Bank of England seeks to ensure demand in the economy slows to relieve domestic price pressures.”

On 3 November, the Bank of England raised interest rates from 2.25 to 3 per cent - the biggest hike in the base rate since 1989.

It was the eighth consecutive time the UK’s central bank hiked rates it sought to tackle rising inflation, fuelled in part by Russia’s war in Ukraine.

At one point last year the rate was 0.1 per cent. Thursday’s 0.75 per cent rise will have a knock-on effect for savers and people who have mortgages on their homes.

Here are Holly Bancroft and Matt Mathers with a quick easy guide to how Thursday’s interest rate change will affect you:

Bank of England officials have continued to stress the importance of bringing down inflation today, following their interest rate hike yesterday.

“Our target is ultimately not on the real economy. Our target necessarily, because we’re running monetary policy, is to contain inflation,” the Bank’s chief economist Huw Pill told CNBC.

“[The] slowdown in the economy is what we anticipate is required to contain domestic inflationary pressures to achieve our targets,” he added.

Business secretary Grant Shapps has hinted that the government’s plans for Northern Powerhouse Rail between Liverpool and Hull could be scaled back, as Rishi Sunak tries to find £50bn through savings and tax hikes.

Mr Shapps told the BBC: “The line itself can deliver a 33-minute journey from Manchester to Leeds, quadruple nearly the capacity of that line, and do so without having to wait an extra 20 years beyond the delivery of what the upgrade can do.

“There wasn’t really much point in going and blasting new tunnels through the Pennines. It’s not true to say we’re not delivering on what we said we would do on levelling up the North.”

The typical responses to a recession will not be suitable to alleviate Britain’s current economic pain, a policy expert has suggested.

Jagjit Chadha, director of the National Institute of Economic and Social Research think-tank warned that typical recession responses would not work given that the main problem in Britain, and in many other rich economies, was an inflationary energy price shock.

“This is not a recession we should be offsetting with lower interest rates and expansionary fiscal policy,” Mr Chadha told Reuters. “That said, we do need to be helping the poorest households who have been through some pretty torrid years.”

The Tories have learned from their decade of austerity that spending cuts cause more pain to the economy than tax increases, an analyst has suggested.

“There’s not much they can do” to avoid a recession, Luke Bartholomew, a senior economist at fund management firm abrdn, told Reuters.

“The issue is to keep it as shallow as possible and come out of it by 2024 so they can be going into an election saying that we are in a recovery.”