Interactive Investor

UK interest rates held for seventh time in a row

Bank of England needs to see more ‘good data’ - but uncertainty continues to weigh on personal finances.

20th June 2024 12:41

by Myron Jobson from interactive investor

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Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The decision to hold [at 5.25%] was widely expected. It is not enough that the headline inflation rate has retreated to the Bank of England's 2% target level. The challenge for the UK central bank is to ensure it stays at that level. The fact remains that more good data, particularly on wages, is needed to give Bank of England policymakers confidence that inflation is truly under control.

“Meanwhile, high interest rates continue to have ripple effects on personal finances. As such, it remains important to keep on top of your finances and make the necessary adjustments to maintain financial resilience."

Savings

“With a cut in the base rate a question of when, not if, the best savings rates are on borrowed time. The simple message for savers is to get a move on to nab the best deals before they’re gone. Those who can afford to put money away for at least five years or more should consider investing for the potential of long-term inflation-beating returns that far outstrip savings rates.”

Mortgages

“Mortgage rates have crept higher in recent weeks on expectations that a cut to the base rate won’t happen as soon as previously thought. However, some providers have bucked the trend by reducing rates on some of their mortgage products.

“Uncertainty over when interest rates will be cut leaves many homeowners, and those aspiring to get on to the property ladder, in limbo. Around 1.6 million homeowners are on a relatively cheap fixed-rate mortgage deal that is expiring this year, and the prospect of higher mortgage repayments would add further strain on budgets at a time when other bills have gone up. 

“Meanwhile, many would-be homebuyers are waiting on the sidelines until they can make the numbers work to buy. It looks like interest rate cuts are the only thing that will change that, for many. Even a modest cut to mortgage rates could amount to significant cost savings.”

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