Interest rates left unchanged at 4%: how it could affect your money 

The BoE has left interest rates unchanged at 4% on Thursday 18 September.  

Seven members of the BoE's Monetary Policy Committee (MPC) voted for the base rate to be held at 4%, while the remaining two members voted for a reduction to 3.75%.  

This does not come as a surprise, as BoE governor Andrew Bailey recently warned he was more worried about higher inflation and weakness in the jobs market. 

While the markets previously expected the base rate to be reduced again to 3.75% before the end of this year, this is wavering. Concerns over rising UK government debt levels and potential proposals being considered in the Autumn Budget at the end of November are casting doubt on the rate drop. 

Looking ahead to 2026, some experts believe interest rates could fall further.  

How will mortgage rates be affected?  

As the base rate is unchanged, it means there should be no change for variable-rate mortgage holders. 

While rates have been falling for fixed-rate mortgage deals, they have recently started rising slightly following a sharp increase in UK government borrowing costs.   

The average five-year fixed-rate mortgage rate is currently 4.56%, according to Rightmove.  

Fixed mortgage rates have remained volatile this year, but some of the most affordable deals are available for under 4%. However, these are typically available to those with more equity in their home or a larger deposit. 

House prices in the UK have risen recently, but forecasts for the year have slowed from 2.5% to 2.2%, according to Halifax.  

It remains more expensive than ever to buy your own home, as mortgage rates are higher than in previous years. 

If you’re considering applying for a mortgage, there are criteria you must meet, including ensuring you can afford it, having a good credit score, and clearing outstanding debt.  

A qualified mortgage broker can boost your chances of a successful application.  

How will savings rates be affected?  

Savings rates have dropped from a recent peak to below 5%. This still beats inflation, which is currently 3.8%.  

Following the BoE’s decision to cut interest rates in August, savings rates have been falling and may continue to do so, despite no reduction this month.  

If you want to seek even higher rates, have long-term financial goals, and don’t need easy access to your cash, you should consider investing, although this comes with additional risk. 

While your investments can rise and fall in value, you may want to give yourself time to handle any possible volatility by investing for at least a few years.  

You can quickly match with a qualified financial adviser via Unbiased, who can help you with an investment strategy, review your existing portfolio, or advise on how to reduce your tax bill legally.  

What about annuities?  

Annuities are useful in retirement by offering a fixed income for life or a fixed period.  

Annuity rates recently exceeded 7.7%, the highest in a decade. While annuity rates have remained resilient following several base rate reductions, they could still fall, so it’s worth considering one now.  

Unbiased can match you with a financial adviser who can help you find the best annuity for your circumstances.