The Bank of England (BoE) has confirmed that interest rates will be cut to 4.5%, paving the way for cheaper borrowing.
The decision means rates are now at their lowest point since June 2023.
The cut from 4.75% to 4.5% indicates cheaper borrowing costs for things like loans and mortgages – but may also mean lower returns on savings.
However, inflation currently sits at 2.5% – above the Bank of England’s 2% target. It is predicted to climb after a rise in energy costs and higher employment costs linked to chancellor Rachel Reeves’s October budget.
The Bank also says it expects the UK economy to grow by 0.75% in 2025, a drop from its previous forecast of 1.5%.
How could this impact dentistry?
Iain Stevenson is head of dental at Wesleyan Financial Services. He offers insight into how the interest rate decision could impact dentists, particularly with regard to borrowing, mortgages and savings: ‘A rate cut, even a modest one, is a welcome development for many dentists who have been feeling the pressure of high borrowing costs.
‘This could provide some relief for those looking to finance major investments, such as new dental equipment or expanding their practices. Furthermore, prospective homebuyers in the dental profession might see more competitive mortgage deals becoming available, easing the financial burden of purchasing property.
‘However, it’s important to note that despite the cut, rates are expected to remain volatile throughout 2025, meaning that further rate fluctuations are likely. Dentists who are planning to enter or move up the property ladder should continue to monitor the market closely and work with an adviser to get the right deal.
‘While a rate cut is a positive step, the uncertain economic environment calls for strategic planning to avoid being caught out by future shifts in borrowing costs.
‘Dentists with savings should view this rate cut, along with the potential for further cuts, as an opportunity to reassess where they hold their capital, considering both return and tax efficiency.
While savings rates have been high, deposit accounts often provide limited protection from taxes on returns, making it an ideal time for dentists to evaluate the purpose and use of their capital.’
‘Cautious but positive’
Vinay Rathod, of VR Financial Solutions, said that we currently have ‘little chance’ to look very far ahead.
‘The real world impact of this remains to be seen, the impact to dentists will likely be second-hand in how it impacts the wider economy and spending habits of patients,’ he said.
‘Low inflation cannot be considered to continue with fears of increased energy and fuel prices causing inflation to rise in the near future.
‘American politics continue to cause ripples across the world, with our financial system not disconnected from them. Even five years post-pandemic and post-Brexit, we face another volatile environment in our economy.
‘A stable outlook is needed to plan wisely and utilise economic tools to direct movement in the right way –even for the Bank of England – caution has been taken by them due to this unknown quantity.
‘Mortgage rates priced in the expected drop already this week, we see more competitive rates and willingness to lend from the banks. But the reality is that not many individuals will feel much real-life impact as a result of this single action, or even the further drop/s we hope to see in coming months.
‘The outlook of poor economic growth, increase in inflation and political instability will see to it that we have little chance to see very far ahead reliably.
‘A cautious but positive outlook remains. Those of you with mortgages or hoping to get one should benefit from the generally more stable atmosphere in worldwide economics, provided worldwide politics doesn’t change that.’
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