The Bank of England (BoE) is expected to make several cuts to the base interest rate in 2026. The move could reduce the cost of your mortgage. Read on to find out what’s predicted and how it could affect you.

Following a period of high inflation, the BoE increased the base interest rate between December 2021 and July 2023. As inflation stabilised, the central bank has announced several cuts, taking it from 5.25% in July 2024 to 4% in October 2025.

With households and businesses facing financial pressure, the bank has faced calls to make further cuts. However, the inflation rate stubbornly remains above the BoE’s 2% target.

The BoE’s Monetary Policy Committee assesses numerous factors when deciding what to do, from wage growth to GDP, and has said a cautious approach is needed.

In a September 2025 statement, the BoE said: ”If the economic situation remains stable, we should be able to reduce interest rates further. But we can’t say precisely when or by how much.

“That depends on how things evolve. So, we will continue to monitor developments in the UK and internationally, and will take a gradual, careful approach to interest rate reductions so inflation remains low and stable.”

Economists expect the base rate to fall to 3.5% in the first half of 2026

It’s impossible to know exactly what’s around the corner for the base interest rate. However, there are expectations that there will be two cuts in the first half of 2026.

Data from a Reuters poll published in October 2025 found that half of economists expect a cut by March 2026, and 60% believe there will be one in the second quarter of the year.  It’s expected to fall to 3.5% by June 2026.

Some economists are looking even further ahead.

An October 2025 article in This is Money states that several financial services firms, including HSBC and UBS, anticipate that interest rates will fall to 3% by the end of 2026.

These predictions are aligned with inflation forecasts. According to data from the Office for National Statistics released in October 2025, in the 12 months to September 2025, the inflation rate was 3.8%.

The rate of inflation is expected to slide to 2.3% by the end of 2026.

Cuts to the base interest rate could be welcomed by variable-rate mortgage holders

What do these predictions mean for your mortgage and repayments? That depends on the type of mortgage you have.

If you have a variable- or tracker-rate mortgage, the interest rate you pay can change. Often, it will rise and fall in line with the decisions the BoE makes. So, the potential cuts could be good news for you and could mean your repayments will fall in 2026.

To put what a cut means into perspective, if you have a £250,000 repayment mortgage with a 20-year term, your monthly repayment would be £1,514 if the interest rate were 4%.

If the interest rate fell to 3%, your repayment would decrease to £1,386, so you’d have an extra £155 in your pocket each month.

If you have a fixed-rate mortgage, the interest rate you pay is fixed for a defined period, even if the BoE changes the base rate. So, you wouldn’t immediately benefit from an interest rate cut.

When your mortgage deal ends, you may find that the interest rate you’re offered when taking out a new deal is more competitive than your previous one.

Get in touch

If you have questions about your existing mortgage or you’re ready to look for a new deal, our mortgage advisers are here to help. We can explain and illustrate what the interest rate means for your repayments, and work on your behalf to find a lender that is right for you, and potentially reduce the amount of interest you’re paying. Please contact us to arrange a meeting.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

What’s the most important factor affecting the performance of your investments?

Your mind might jump to the ups and downs of the market, and they do have an effect. When share prices rise, so too will the value of your portfolio. However, the markets aren’t the starting point of a successful investment: your mindset is.

Your approach to investing could influence your success.

Short-term market movements don’t always reflect long-term trends

Tracking the markets can be enticing. They are constantly moving, with numerous factors influencing them. Headlines can make even slight adjustments seem dramatic.

It can seem logical to focus on these movements, but doing so overlooks the long-term perspective that benefits most investors. When you look at the market returns over decades, you’ll see that the ups and downs smooth out.

Instead, you’re left with a general upward trend. Even when markets have fallen sharply, such as during the Covid-19 pandemic, they have, historically, recovered these losses over a long-term time frame.

Investors who focus on short-term market movements can find it more tempting to make adjustments to their portfolio as they try to time the market (buy low, sell high). As movements are impossible to consistently predict, they’re likely to make mistakes and could miss out on long-term gains as a result.

So, if you shouldn’t be keeping an eagle eye on market movements, how should you approach investing?

Calmness and patience are often essential for long-term investors

An important first step to take is to define why you’re investing. Your reason might affect your investment time frame and the level of risk that’s appropriate for you.

Then, you can create an investment portfolio that reflects your goals, risk profile, and financial circumstances. Your financial planner can help assess what’s right for you.

Next, far from keeping an eye on the markets section of the newspaper, it’s time to be patient. Trusting your investment strategy and taking a long-term approach could lead to better outcomes and stronger returns.

It sounds simple, but embracing this mindset can be more difficult than you expect – it’s so easy to reach for your phone and check your portfolio’s performance or the news. While that might seem harmless, it can trigger an emotional response, from fear to excitement. These emotions mean you’re more tempted to change your investments and potentially miss out on long-term gains.

If you struggle to focus on the bigger picture when investing, you might benefit from:

• Reducing media exposure
• Setting clear dates when you’ll look at the performance of your portfolio
• Going back to your initial investment goal when you’re making a decision
• Working with a financial planner who can highlight when short-term market movements might be affecting your emotions.

These simple steps could help you develop some of the most important skills for successful investing: patience, discipline, and emotional control. Adopting a mindset that embraces these attributes could have a greater impact on your returns than short-term market movements.

Taking a long-term approach doesn’t mean you never look at your investment portfolio. Regular reviews are still important. However, look at the performance over years, rather than days or weeks.

Similarly, there might be times when it’s appropriate to make adjustments to your portfolio due to changes in your circumstances or long-term trends, not because of the latest headline.

Get in touch to talk about your investment strategy

If you’d like to work with us to review your current investment strategy or you’re interested in investing for the first time, please get in touch. We can help you create a portfolio that reflects your aspirations and circumstances.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

A financial plan is rarely focused solely on the person making it. For many, a successful plan also benefits their family.

When setting out your goals as part of your financial plan, your family might feature in them. Perhaps you want your retirement income to be enough so that you can treat them to an annual family weekend away? Or you might want to gift a deposit that will help each of your grandchildren get on the property ladder?

By incorporating family goals into your financial plan, you can take steps to turn them into a reality.

If you’re hesitant to offer support because you’re worried about how it will affect your long-term finances, using a cashflow model could be valuable.

A cashflow model can give you an idea of how your wealth might change based on the decisions you make. It may ease your worries and give you the confidence you need to expand your financial plan to include your loved ones.

There are several ways you might support loved ones as part of your financial plan.

Providing gifts to support your loved ones’ finances now

You may want to support your loved ones immediately. Whether through providing gifts or covering regular expenses on their behalf, it’s an option that your family might welcome, particularly if they’re struggling to manage their short-term expenses.

One of the benefits of gifting during your lifetime is that it could reduce your estate’s Inheritance Tax (IHT) liability.

In 2025/26, the nil-rate band is £325,000. If the entire value of your estate is below this threshold, no IHT will be payable. Many people can also make use of the residence nil-rate band, which is £175,000 in 2025/26, if they leave their main home to direct descendants.

If the value of your estate exceeds these thresholds, IHT may be due.

Some gifts are immediately outside of your estate when calculating IHT. As a result, if you want to support loved ones now, you may want to consider using these gifting allowances:

• Up to £3,000 each tax year, known as your “annual exemption”
• Up to £250 to each person, so long as they have not benefited from another allowance
• £1,000 as a wedding gift, rising to £2,500 and £5,000 for grandchildren or great-grandchildren and children respectively.

Another exemption which could be useful if you want to support loved ones now is regular payments made to another person. You might use this allowance to:

• Pay rent for your child
• Give financial support to cover living costs
• Pay into a savings account for your grandchild.

Payments must be regular and funded from your monthly income after living costs. If you use this allowance to reduce an IHT bill, it’s a good idea to keep a record of the payments.

A financial plan can help you assess how gifts might affect your long-term wealth. So, when you gift a generous sum or commit to regular support, you can do so with confidence.

Offering gifts that support your family’s long-term goals

Another option is to set money aside for your family to support their long-term goals.

For instance, you might focus on building a nest egg for your grandchildren to help them through university, buy their first car, or travel the world.

Incorporating this into your plan helps identify the best way to save, depending on your goals and the beneficiary’s circumstances.

When saving for a child to provide a financial helping hand when they reach adulthood, you might choose a Junior ISA, which they gain access to when they turn 18. Whereas if you were helping your child increase their retirement fund, you might make contributions directly into their pension.

Incorporating these gifts into your financial plan can also help make them part of your regular outgoings and provide reassurance that you’re still on track to meet your other goals.

Leaving an inheritance

Receiving an inheritance could change your loved ones’ financial situation and mean they’re more secure.

If leaving assets behind for your family is important to you, it can be a central part of your financial plan. You might earmark a portion of your wealth to leave in your will or set aside particular assets for someone.

We can help you understand how much you could leave behind for loved ones, and how to do it tax-efficiently. 

Contact us

A good financial plan helps you reach your goals, including those that involve your family, and we can help you. Whether you want to involve your loved ones in planning or build a nest egg to support them long-term, please get in touch.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

The Financial Conduct Authority does not regulate cashflow modelling, Inheritance Tax planning, or estate planning.

The importance of saving is drummed into us from a very early age. As a child, for example, you may have had a moneybox and been encouraged to save your spare coins.

As you get older, this extends into saving for university, saving up for a house, saving for retirement, and so on.

But what about spending? While looking after your financial future is indisputably important, so is taking care of your financial present.

Saving can become an ingrained habit that’s tough to break. Equally, spending can be a specific skill, and, like any other, it takes practice and support.

Read on to find out how having a strong financial plan in place can help you strike the right balance between spending for today and saving for tomorrow.

Anxiety over spending could mean missing out on fulfilling opportunities and experiences in the here and now

There have probably been occasions throughout your life where you’ve had to cut back a little, or your budget has prevented you from buying something.

But if this becomes a persistent pattern of unjustified frugality, it can affect your everyday life.

This fear of spending can be deep-rooted, and for some, it becomes so severe that it develops into a phobia known as “chrometophobia”.

While this is relatively rare, anxiety over spending is fairly common.

According to an August 2025 article in Money Marketing, in 2025, UK adults report negative emotions associated with spending retirement savings, including:

• Anxiety (26%)
• Fear (18%)
• Guilt (15%)

If this is you, it could mean that you’re missing out on opportunities and experiences that you could well afford.

This is where a strong financial strategy can help. It would be easy to assume that financial planning deals only with saving, investing, and maximising wealth.

While these are key elements, the essence of financial planning is to help you live a rewarding life – during work, retirement, and beyond.

Living the life of your dreams is a key aspect of financial planning

To start spending your wealth with confidence, it can help to first define your life goals. These form the cornerstone of your financial plan, shaping your saving and spending to help you live the life of your dreams.

For example, they could include:

• Buying a second property or a holiday home
• Spending more time with your family
• The age at which you’d like to retire
• Travelling more.

Life goals are different for everyone, which is why bespoke financial advice is so important.

Cashflow modelling can project your finances over a range of scenarios, giving you increased spending confidence

Once you’ve identified what your goals are, you can map out your financial future, perhaps with the support of a financial planner.

Using a process called “cashflow modelling”, a financial planner can help to ascertain what income you are likely to need during retirement to live your dream lifestyle. Then, they can assess how well your wealth is organised to support those goals.

Using sophisticated software, your planner inputs details of your current income, spending, savings, investments, and pensions, along with your expected income and expenditure in later life. The software then factors in assumptions about inflation, tax, and investment growth to project how your finances might evolve over time, helping you visualise the impact of different life events and scenarios.

Plus, it will incorporate your tolerance to, and capacity for, losses, as well as how much you need to reach your goals. You can adjust these to see how outcomes might change.

Cashflow modelling can give you increased confidence that your savings will support your goals, as well as give you an idea of how different levels of spending could impact this.

While this process doesn’t offer any guarantees, it can offer educated guidance into your potential financial future.

Providing for your loved ones doesn’t always mean saving above spending

Effective estate planning is also a key part of financial confidence. If you’re thinking about how to provide for your loved ones after you’re gone, you may feel guilty spending money on yourself, and building up your wealth could seem like the logical move.

However, Inheritance Tax (IHT) rules can be complex, and simply leaving a large estate to your loved ones could mean you inadvertently land them with a large tax bill.

In some cases, spending some of your wealth to keep within the IHT threshold, which in 2025/26 is £325,000, could actually prove to be a more cost-effective option.

Get in touch

If you struggle with the concept of spending, it can often help to reframe it. Think of spending as investing in enriching your life, in the same way as saving is investing in your future.

If you’d like to talk to us about any aspect of financial planning, please get in touch, and we’ll be happy to help.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning, cashflow planning, or tax planning.

The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

October 2025 proved to be a positive month for many investors, with markets reaching record highs. Read on to find out more about what factors may have affected your portfolio’s performance.

Remember to take a long-term view when assessing your investments and consider your risk profile when making decisions.

Markets experienced record highs, but investor uncertainty continued to have an effect

The month started strongly with the FTSE 100 closing at a record high on 1 October. AstraZeneca was the biggest riser, making the pharmaceutical firm the most valuable company listed in London.

In the year to 1 October, the FTSE 100 was up almost 15% and could be on track for its strongest year since 2009, when the market recovered from the financial crisis.

It was a similar picture in the wider European and US markets.

On 2 October, European shares hit a record high. The pan-European Stoxx 600 index increased by 0.7%, driven by gains in German and French companies. Wall Street also reached new heights when it opened, with the S&P 500 index up 0.3%.

Despite the promising start to the month, French stocks fell on 6 October. The market fell when new prime minister Sébastien Lecornu resigned after less than a month in office. The French index CAC 40 tumbled 1.8% as a result.

Signalling that investors may feel nervous, the price of gold surpassed $4,000 an ounce (£3,005) for the first time on 8 October. Gold is often viewed as a “safe” asset, and its price has increased by 50% in the first nine months of 2025.

The soaring price of gold is good news for mining companies. Antofagasta, which operates gold mines in Chile, was the biggest riser on the FTSE 100 after jumping 2.7%.

Trade tariff threats and actual tariff measures have caused market volatility throughout 2025, and October was no different. On 13 October, the US and China threatened to impose tariffs, which led to Asian stocks falling.

On 17 October, anxiety around US regional banks and credit concerns spooked the market. The US S&P 500 index was down 1.2%, and the ripple effect was felt in many other markets.

In the UK, the concerns sparked a sell-off that knocked nearly £11 billion off bank valuations. The FTSE 100 closed 0.87% down, with Barclays (-5.66%), NatWest (-2.88%), and HSBC (-2.5%) among the biggest losers.

There was a similar sell-off in Europe. The Stoxx 600 index (which includes UK banks) was down 2.4%, and around €37 billion was wiped off the value of the European banking sector.

The Asia-Pacific markets weren’t immune. China’s CSI 300 dropped 2.3% and Japan’s Nikkei fell 1%, although the dip in this region was partly attributed to investor caution over profits of AI shares.

Japanese markets quickly recovered on 21 October when Sanae Takaichi won a parliamentary vote to become the country’s first female prime minister. She is expected to push for looser fiscal policy.

The US announced new sanctions on Russia on 23 October, which pushed up the price of crude oil. This led to both BP and Shell shares rising by around 3.5% and the FTSE 100 reaching another record high.

The positive news continued on 24 October. The FTSE 100 broke the record set the previous day and exceeded 9,600 points for the first time. On the back of an inflation report, the US indices – the S&P 500 and the Nasdaq – also broke records.

In addition, Shanghai’s SSE Composite Index increased by 0.7% and reached its highest level in more than a decade. The boost was linked to Beijing stating it would focus on chips and AI to achieve technological self-reliance, which led to stocks in this sector rising.

UK

In the 12 months to September 2025, inflation was 3.8% – stubbornly remaining above the Bank of England’s 2% target.

The International Monetary Fund increased its 2025 UK inflation forecast to 3.4% (up from 3.1% in April), saying the UK was set to have the highest in the G7.

Official figures estimate UK GDP increased by just 0.1% in August. The report suggested there was no service growth, which may reflect business caution ahead of the upcoming Budget.

Data from the Office for National Statistics (ONS) shows the government borrowed £99.8 billion between April and September 2025. This is the largest sum borrowed since 2020 and is £7.2 billion more than the Office for Budget Responsibility forecast in March 2025. The news will add further pressure to the chancellor ahead of the Budget, which will take place on 26 November 2025.

Trade data released in October 2025 was also poor. According to the ONS, the trade deficit widened with exports to the US and EU falling by around £700 million and £800 million respectively in August 2025.

Readings from a Purchasing Managers’ Index (PMI) suggest that businesses may be taking a cautious approach in the lead-up to the Budget.

The S&P Global PMI found that sluggish demand led to a reading of 50.8 in September in the service sector. While the figure remains above the 50 mark that indicates growth, it’s a marked drop from the 54.2 recorded in August.

The manufacturing sector shrank at the fastest pace in five months as factories were affected by subdued domestic demand and falling export orders. The reading of 46.2, which indicates contraction, was also linked to a cyberattack on Jaguar Land Rover that halted production and disrupted supply chains.

Europe

In August, the euro area hit the European Central Bank’s inflation target of 2%. However, it increased to 2.2% in September.

S&P Global’s PMI, which tracks business activity, was positive. The eurozone private sector delivered a reading of 52.2 after rising at the fastest pace in 17 months. Businesses also recorded the strongest increase in new orders in two and a half years.

The EU’s two largest economies, Germany and France, reported sharply contrasting performances. Germany’s output growth reached a 29-month high. In contrast, France posted 14 consecutive months of decline amid political uncertainty.

While the PMI data suggests businesses are confident, unemployment figures released by Eurostat indicate many firms are being cautious. Across the eurozone, unemployment increased by 0.1% to 6.3% in August.

Highlighting the far-reaching impact of US trade tariffs, Switzerland cut its 2026 economic growth forecast to 0.9% against the 1.2% predicted in June 2025. The Swiss government noted that exports have been affected by tariffs, creating a ripple effect across the broader economy.

US

Inflation in the US in the 12 months to September 2025 was 3%. The figure is slightly lower than expected and could add to the pressure the Federal Reserve is already facing from the US president to cut interest rates.

PMI data for the US service sector fell to 54.2 in September but remained in growth territory.

However, a survey conducted by recruitment firm Challenger, Gray & Christmas suggests that business uncertainty may be causing firms to halt hiring plans. In the nine months to the end of September 2025, 205,000 fewer jobs were created when compared to the same period in 2024.

Asia

Takaichi, Japan’s new prime minister, could be welcome news for investors. She is expected to embrace government spending, lower interest rates, and adopt a looser approach to monetary policy than her predecessor. It’s hoped that this will encourage businesses to invest and support economic growth.

While China’s GDP growth of 4.8% year-on-year between July and September 2025 might seem high compared to other economies, it’s the slowest pace recorded in a year. In addition, hopes that the economy could reduce the impact of tariffs by moving away from exports to domestic consumption were tempered when retail figures remained weak.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Last month, you read about how retirement is changing, with almost half of workers aged over 50 exploring phasing into retirement. There are plenty of reasons why more people are considering a gradual retirement, including the emotional and financial benefits this option could offer.

A gradual retirement could help you retain a sense of purpose and social life

When thinking about retirement challenges, most people focus on having enough to live on for the rest of their lives. The emotional challenges may be overlooked.

Retirement is a significant milestone and can change your lifestyle completely. If you retire on a set date, you may go from a fixed routine to the freedom to spend your time however you wish within a single day. While that might sound like bliss and something you’ve been looking forward to, it’s not uncommon to struggle with it initially.

An October 2017 survey by the Centre for Ageing Better and the Calouste Gulbenkian Foundation found that 20% of UK adults who had retired within five years said they found the change difficult.

Those planning to retire within five years of the survey also reported concerns, including:

• Feeling bored (33%)
• Missing social connections from work (32%)
• Losing their purpose (24%)
• Feeling lonely (17%)

Age UK research from December 2024 further demonstrates the challenges some retirees face. It found that 7% of people aged over 65 – the equivalent of around 940,000 people – often feel lonely.

Phasing into retirement could help you retain your sense of purpose and social circle while benefiting from more free time to pursue your passions or simply enjoy a slower pace of life.

Phasing into retirement could support your long-term finances

There are two key reasons why taking a gradual approach to retirement could be beneficial from a financial perspective.

First, if you’re still earning an income, you might not need to draw money from your pension or deplete other assets. As a result, you’ll have more to fund your lifestyle once you give up work completely.

In some cases, your salary will be lower when you’re phasing into retirement, so you might take an income from your pension to supplement it. While you’d be reducing the value of your pension, it’s likely to be at a slower rate than if you weren’t working at all.

Second, you may opt to continue contributing to your pension while you’re transitioning. Again, this could mean your pension is larger when you need to cover more of your expenses in the future.

It’s important to note that if you take a flexible income from your pension, the amount you can contribute tax-efficiently could fall to just £10,000 in the 2025/26 tax year under the Money Purchase Annual Allowance. If you plan to contribute to your pension as you phase into retirement, we can help you assess how to do so tax-efficiently.

Managing your finances if you’re gradually retiring can be complex. You might be juggling multiple incomes, and you’ll also need to consider how your decisions could affect your long-term security.

Working with your financial planner to create a cashflow model can provide clarity. It’s a useful tool that could help you assess the effect of your decisions, so you can feel confident about your finances.

For example, you might use a cashflow model to see if you have enough in your pension to halt contributions earlier than planned so you can phase into retirement. Or you could see how the value of your pension will change if you withdraw £20,000 annually for five years to supplement your salary before taking an annual income of £40,000 when you stop working.

While the results of a cashflow model cannot be guaranteed, it does provide useful insight to help you make informed decisions about retirement or other financial matters.

Contact us to discuss your retirement plan

We can help you create a retirement plan that reflects your lifestyle goals, including phasing into retirement. Please get in touch to discuss the next chapter of your life.

Next month, read about some important financial considerations if you’re planning to phase into retirement, such as when to access your State Pension and how to manage tax liability.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate cashflow modelling.