Interest rates expected to be cut by Bank of England

Interest rates are widely expected to be cut on Thursday, with further falls predicted for later in the year.

Analysts say a cut to 4.25% from 4.5% by the Bank of England is highly likely, although no change or a bigger reduction remain possibilities.

Such a move would make borrowing money by businesses and individuals less expensive, but there are likely to be lower returns for savers.

The announcement will come at 12:02 BST, following a two-minute silence to mark VE Day.

Members of the Bank's Monetary Policy Committee (MPC) will be paying close attention to the rate of price rises in the UK, as measured by inflation.

Interest rates are the Bank's primary tool in ensuring the annual rate of inflation remains at, or close to, the target of 2%.

The latest data shows an inflation rate of 2.6% in the 12 months to March, although a series of bill increases at the start of April - including domestic energy prices - mean the rate is expected to climb, perhaps only temporarily.

The committee will also be alert to wider global economic uncertainty. President Trump's tariff policy in the US was unveiled after the MPC's last meeting in March.

Many analysts say inconsistency and uncertainty regarding the policy may push down growth and inflation, leading to expectations of the MPC responding with more interest rate cuts this year.

The likelihood of an immediate cut, with more to come, has been reflected in the markets and, in turn, on mortgage pricing.

Eight in 10 homeowners with a mortgage have a fixed-rate deal and will pay close attention to the interest on new deals when they first buy or when they shop around ahead of a current deal expiring.

Lenders have been cutting the mortgage rates on these new fixed deals in recent weeks, although not down to the levels seen during most of the 2010s. Given that lenders have already "priced in" a cut in interest rates, further falls in mortgage rates are not guaranteed.

The average two-year fixed mortgage rate is 5.15%, according to financial information company Moneyfacts, and a five-year deal is 5.08%.

Samren Reddy, a medical student at the University of Liverpool who got in touch with Your Voice, Your BBC News, is saving to buy a first home.

"I don't think a small decrease will be a game changer. We're saving for the initial upfront deposit," the 21-year-old said.

"If I'm trying to save for a home, alongside my day-to-day living, even if I may be paying less on a loan and could get a cheaper mortgage, it's swallowed up by the pressures of living."

A fall in interest rates are also likely have an impact on the returns people like Samren receive on their savings.

Base rate cuts generally lead to reductions in the interest provided by savings providers, particularly on instant-access accounts.

Anna Bowes, savings expert at financial advice firm The Private Office, said it was "encouraging" that fixed savings rates were still competitive, with relatively high interest paid.

However, she said that required people being willing to lock their savings into an account and to leave them untouched for the term of the deal, generally between one and five years.

A rate cut would guarantee some mortgage-holders lower monthly repayments.

Nearly 600,000 homeowners have a mortgage that "tracks" the Bank of England's rate, so a base rate change would have an immediate impact.

A typical tracker mortgage-holder is likely to see about £29 knocked off their monthly repayments if the Bank rate is reduced by 0.25 percentage points, according to calculations by banking trade body UK Finance.

Homeowner Vanda, who has a tracker, told the BBC: "I had a really good rate, then all of a sudden it changed and I got caught out.

"A drop would help because I've just been made redundant, so that would help a wee bit. I don't think it will ever go back to the way it was, though."

Those on standard variable rate mortgages will need to wait for the lender to decide on any changes to the home loan rate if the Bank's base rate changes.