As inflation finally eases, an interest rate cut next month looks likely

“With inflation finally moving lower, it now looks increasingly likely the Bank of England will reduce borrowing costs at its next meeting.

“That prospect brings both positives and negatives. For borrowers, a rate cut should translate into cheaper mortgages, offering welcome relief to those coming to the end of their current deal and looking to secure a new one.

“For savers, however, the picture is less rosy. Falling interest rates typically feed through to lower savings returns, so now is the time to shop around for the best deals. The silver lining is that lower inflation also means savers’ cash is no longer losing purchasing power as quickly.

“But for anyone relying heavily on cash, it’s worth remembering that, over the long term, investing remains the only reliable way to outpace inflation and protect the real value of your wealth.

“And as the speculation mounts around the future of cash ISA’s in next week’s Autumn Statement, we believe there is a strong case for reducing the cash annual allowance to boost savers’ returns. We believe that a limit could be set at as low as £8,000, which could give savers enough of an opportunity to build up a sizeable emergency pot, while at the same time encouraging excess funds to be invested into the stock market.

“The UK’s reliance on cash savings is one of the biggest drags on household wealth creation. Around £360 billion is held in cash ISAs, often earning rates that struggle to keep pace with inflation—meaning savers are seeing their spending power diminish.

“By contrast, UK equities have historically delivered real returns of roughly 6% per year. Even a modest reallocation of savings into equities could materially improve outcomes for households and support investment in UK businesses.”