UK interest rates held at 5.25%

The latest hold on interest rates underscores the Bank of England’s caution regarding inflation. Cutting the base rate too soon risks undoing the colossal effort it took to reduce inflation from its peak of 11.1% in October 2022. With inflation still almost double the Bank of England’s 2% target, the battle against inflation has not yet been won.

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But the green shoots are sprouting when it comes to the cost of living. Crucially, core inflation, which strips out volatile components such as food and energy, fell significantly last month, helping alleviate fears that high inflation has become deeply entrenched in the UK economy. This, along with recent economic data showing that the UK has taken its first steps out of the shallow recession it fell into in the second half of last year, is likely to lead Bank of England officials to debate how long they need to leave rates at their current level.

What today’s decision mean for mortgage and savings rates

While interest rates haven’t changed in a while, mortgage and savings rates have been fluctuating. There has been somewhat of a rates hokey-cokey in the mortgage marketplace, with lenders repricing loans based on the movement of swap rates, which greatly influences the pricing of fixed-rate mortgages. Many lenders have swiftly cut rates following yesterday’s inflation reading, raising hopes that interest rates will come down faster than expected this year. This means borrowers can secure mortgages at more affordable terms, potentially saving money over the life of the loan.

When it comes to savings rates, the top deals continue to disappear rapidly. The simple message for savers is: act quickly to secure the best deals before they vanish.

High-interest rates continue to have ripple effects on personal finances. Therefore, it remains important to stay on top of your finances and make the necessary adjustments to maintain financial resilience.