With the Bank of England holding the base rate at 5.25% for a seventh consecutive time, many savers will be wondering what the rest of the year has in store.
Read on to discover if and when interest rates are likely to increase again and what this could mean for savings accounts.
The current Bank of England base rate is 5.25%. The next update is on 1 August 2024.
On 20 June, the Bank of England’s Monetary Policy Committee (MPC) held the base rate at 5.25% for a seventh consecutive time.
Inflation returned to the Bank’s 2% target for the first time in nearly three years in May, but Andrew Bailey, the Bank’s governor, said: “We need to be sure that inflation will stay low, and that’s why we’ve decided to hold rates at 5.25% for now.”
The lowest two-year fixed-rate mortgage available is currently 4.67%, down from 4.75%.
The Bank will meet again on 1 August to decide what level interest rates should be set at.
Inflation: CPI inflation is currently 2.0%
Interest rates: Pressure is building on the Bank to cut at the next meeting in August
Lock away: The International Monetary Fund (IMF) recommended that UK interest rates should fall to 3.5% by the end of 2025
The current rate of inflation is 2.0%, as of May 2024.
In February 2022, the BoE announced the base rate would increase to 0.5% as spiralling energy costs pushed inflation to a 30-year high. Interest rates rose again in April 2022, and by a further 0.25% in May 2022 to reach 1.00% at the time, the highest level in 13 years. However, with inflation still climbing, the BoE continued to increase the base rate – and by September 2023, the rate was set at 5.25%, marking the 14th consecutive rise by the Bank. The BoE then held the rate at 5.25% seven consecutive times.
Although financial markets are focusing on August 1 as the next likely date for a cut, inflation is expected to rise a little over the course of 2024, so it’s difficult to predict exactly what will happen.
There are many factors that influence interest rates in the UK. These factors are all indicators of the strength of the UK economy, with things such as employment levels and financial growth acting as key metrics.
Time is running out if you want to fix a higher rate to get better returns.
The best savings account for you will depend on various factors, such as if you have a lump sum to invest and whether you’ll need access to your money. If you can afford to lock your money away for a set period, you might want to opt for fixed interest rate products, such as fixed rate bonds. They offer the most competitive rates of all account types and are ideal for long term savings goals. Alternatively, you could opt to open a variable rate savings account, such as a notice account.
Regardless of what happens to interest rates in the UK, there’s never a bad time to save.
To find the best savings account for you and compare interest rates on savings accounts, register for a Raisin UK Account and log in to apply.