Customers helped

Bank of England holds interest rates again at 5.25%: what does this mean for your money?

Updated 20 December 2023

3min read

Lisa-Marie Voneshen

The Bank of England (BoE) has held interest rates at 5.25% today, 14 December. 

Over two years, the BoE has hiked the base rate 14 times to combat high inflation, which appears to be finally working as UK inflation fell from 6.7% in September to 4.6% in October. 

While inflation is forecast to fall next year, it’s unlikely to reach the BoE’s 2% target until 2025. 

We’ll now explore what this interest rate decision in the UK means for you and your money.

Get mortgage advice
We’ll find a professional perfectly matched to your needs. Getting started is easy, fast and free.

Will the latest decision affect my mortgage? 

It’s good news for mortgage holders, particularly those on variable-rate mortgages, as a base rate rise usually leads to increased rates. 

If you have a fixed-rate mortgage, rates have fallen ahead of today’s decision.

Some fixed-rate mortgages have recently fallen below 5% and could fall further to under 4%, but this is high compared to historic standards, so you'll likely still pay more when you remortgage.

"While mortgage rates are easing as interest rate expectations improve, those refinancing now face significant repayment hikes when they switch to a new product," said Alice Haine, personal finance analyst at Bestinvest.

If you’re looking to get on the property ladder, it’s become more expensive to buy your own home, driven mainly by higher mortgage rates. 

While house prices are expected to fall next year, according to Rightmove, the mortgage market is slowly improving as UK mortgage approvals hit a three-month high in October. 

If you’re applying for a mortgage soon, it’s worth making sure you can afford the monthly payments and that you have a good credit score, as well as clearing any debt, if possible.  

You should talk to a broker who can boost your chances of a successful mortgage application. Click below to find a regulated mortgage broker

Will the latest decision affect my savings? 

Savers have recently benefitted from rising interest rates, but rates have now peaked. 

You can now beat inflation at 4.6% with a top fixed-rate account offering around 5.6%, but you must lock your money away for a year. 

It's a good idea to fix your savings now before interest rates fall.

"We’ve already seen cuts to savings rates, particularly in the fixed rate market, and that’s a trend that’s going to continue," said Laura Suter, director of personal finance at AJ Bell.

If you have long-term financial goals and don’t need immediate access to your cash, consider investing. While the value of your investments can rise and fall, you may be able to ride out volatility by investing for a few years. 

A financial adviser can help you with an investment strategy or review your existing portfolio. 

Have interest rates peaked? 

Many experts believe interest rates are now at their peak, but this is not guaranteed. 

For example, if inflation rises again, the BoE may resort to further base rate increases to bring it down.

If you’re feeling uncertain about your money or facing a big decision, consider seeking advice from a financial adviser regulated by the Financial Conduct Authority (FCA) via Unbiased. 

Get mortgage advice
We’ll find a professional perfectly matched to your needs. Getting started is easy, fast and free.

About the author
Lisa-Marie Voneshen is a Senior Content Writer at Unbiased. She is an award-winning journalist with nearly a decade of experience writing and editing content across various areas, including personal finance and investing.