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

The Bank of England (BoE) has held interest rates at 5.25% today, 2 November.

Since December 2021, the BoE has hiked the base rate 14 times to combat high inflation. While inflation remained unmoved at 6.7% in September, the slowing UK jobs market has led the BoE to hold rates steady.

The outlook for the rest of the year looks more positive, with inflation expected to drop to 5% by the end of this year.

However, the Bank of England has downgraded its economic forecasts for the UK in 2024 with zero growth expected, but this forecast could change in the future.

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

For the latest interest rate announcement, see here.

Will the latest decision affect my mortgage?

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

“A hold in interest rate is good news for the 2.2 million homeowners on variable rate mortgages who have been on a swashbuckling ride during the cycle of 14 consecutive interest rate hikes, which saw their monthly repayment obligations balloon,” said Myron Jobson, senior personal finance analyst at interactive investor.

“It would mean that their interest payments will remain stable, which can be a relief.”

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

Some fixed-rate mortgages have recently fallen below 5%, but this is still high compared to historic standards.

If you’re looking to get on the property ladder, the outlook is concerning as it’s become more expensive to buy your own home – and prices have recently fallen.

UK house prices are anticipated to fall until 2025, according to Lloyds, as higher borrowing costs have impacted the housing market.

Mortgage approvals fell in September, while remortgaging approvals hit their lowest level since January 1999 as the property market comes under more pressure.

You might get rejected for a mortgage if the lender doesn’t think you can afford it or you have a poor credit history (for example, you have missed or late payments).

Other reasons for rejection include having too much debt or too many hard credit checks. It’s worth talking to a broker who can help you boost your chances of a successful mortgage application, based on your circumstances.

Click below to find a regulated mortgage broker.

Will the latest decision affect my savings?

Savers have benefitted from rising interest rates over the last few years, but rates have likely now peaked.

The top fixed-rate account offers just under 6%, but you must lock your money away for a year. This is still below inflation at 6.7%, although it could be worth fixing in case rates fall further.

“Those who have been waiting to nab a top savings deal might want to get a move on as the very best deals may not be around for much longer,” commented Jobson.

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.

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.