The Bank of England has decided to maintain the base rate at 4.5%. This interest rate directly affects what banks and lenders charge borrowers. The recent trend has seen a gradual decline in interest rates from a peak of 5.25% in August 2023.
Since August 2024, the base rate has seen two cuts, bringing it down to the current 4.5%. Despite economists predicting the rate to hold steady due to inflation hitting 3% in January, the Bank of England aims to manage inflation using interest rates amidst global economic uncertainties.
The majority of the Bank of England Monetary Policy Committee members voted to keep rates unchanged. Governor Andrew Bailey emphasized the need to monitor economic developments closely to ensure stable inflation levels.
For individuals with tracker mortgages, monthly payments remain unaffected as they align with the base rate. Those on standard variable rate mortgages may see changes, typically following the base rate adjustments. Fixed-rate mortgage holders will not experience immediate payment changes.
Prospective borrowers should expect slightly higher rates for new credit cards or loans. Debt management is crucial for those with existing debt, advising exploration of repayment options. Savings rates have slightly lowered post-Bank of England cuts, with various options available to beat inflation rates.
Victor Trokoudes, CEO of money app Plum, stresses the importance of shopping around for competitive savings rates, especially from fintechs and smaller providers. Utilizing tax-saving options like ISAs with rates above 5% can maximize savings growth opportunities.