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

Updated 14 December 2023

2min read

Lisa-Marie Voneshen

The Bank of England (BoE) has held interest rates at 5.25% today (21 September).

Since December 2021, the BoE has hiked the base rate 14 times to combat high inflation, which is expected to drop from 6.7% to 5% by the end of this year.

Following an unexpected fall in inflation from 6.8% to 6.7% in August, the BoE has decided to hold rates steady instead of hiking them

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

For the latest interest rate news, see here.

Will the latest decision affect my mortgage?

There’s some good news for those with a mortgage, particularly those on variable-rate mortgages, as a base rate rise usually leads to an increase in rates.

If you have a fixed-rate mortgage, rates have already been falling ahead of today’s decision due to a drop in swap rates, so your mortgage could get cheaper.

Fixed-rate mortgages have fallen below 5% for the first time in months, but this is still high compared to historic standards.

“The biggest winners from the BoE’s decision are those with a tracker mortgage deal, who will breathe a huge sigh of relief, having been pummelled by a series of back-to-back rate rises, which has resulted in higher monthly mortgage repayments,” said Myron Jobson, senior personal finance analyst at interactive investor.

“This cohort faced a £26 a month increase to their mortgage repayments if the bank pressed ahead with a 25-basis point increase to the base rate.”

Elsewhere, UK house prices have experienced the fastest annual decline since 2009.

If you want to get on the housing ladder or remortgage, it’s wise to seek expert financial advice. Click below to find a regulated mortgage broker.

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Will the latest decision affect my savings?

Savers have benefitted from rising interest rates, but many experts believe savings rates have peaked.

The top fixed-rate account now offers 6.20% if you lock your money away for a year, but this is still below inflation – although it could be worth fixing now in case rates fall.

It’s worth shopping around for the best savings account. If you plan on putting your money into a fixed-rate account, ensure you won’t need to access your cash before the term ends.

If you’re hoping to beat inflation and have a long-term financial goal, it’s worth considering investing, especially now that savings rates have likely peaked. 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.

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Have interest rates peaked?

Many experts have suggested that interest rates are now at their peak but this is not guaranteed.

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.

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.