Bank of England holds base rate at 5% – what it means for your savings

Today, the Bank of England's Monetary Policy Committee (MPC) chose to keep the base rate unchanged at 5%. This was widely anticipated, with 57% of savings experts accurately predicting a ‘hold’ outcome.

But not all were in favour. The MPC voted by a majority of 8-1. One member advocated to cut the base rate by 25 basis points, saying that “the bank rate needed to become less restrictive now to enable a smooth and gradual transition in the policy stance”. But the remainder, including Andrew Bailey, the Governor of the Bank of England, took a cautious stance.

This move follows the first rate cut in over four years, which the Bank of England made on 1 August, lowering the base rate from 5.25% to 5%.

Commenting on today’s decision, Bailey said: “Inflationary pressures have continued to ease since we cut interest rates in August. The economy has been evolving broadly as we expected.

“If that continues, we should be able to reduce rates gradually over time. But it’s vital that inflation stays low, so we need to be careful not to cut too fast or by too much.”

The impact on your savings

While interest rates on savings accounts have come down slightly from their peak, they’re still higher than they’ve been in recent years.

So, what does this mean for your savings?

Here are our three key takeaways to help you navigate the current landscape and make the most of your money.

Three key takeaways from the base rate announcement

1. Persistent inflationary pressures

The Bank of England adjusts the base rate to keep inflation as close to its 2% target as possible. Following the August rate cut, Bailey said the Bank needs to make sure inflation stays low and avoid cutting rates too quickly.

In July, it was announced that inflation had inched up to 2.2%. Savers should be aware that rising energy prices and other factors might push inflation up further in the coming months. The Bank of England has projected inflation to rise to 2.75% by year-end.

2. Future rate cuts expected

Despite the slight increase in inflation, the base rate is still predicted to fall by the end of the year. According to the latest Flagstone Base Rate Poll, 69% of savings experts anticipate that rates will hit 4.5% by the end of the year.

3. Act now to secure top savings rates

Several banks and building societies have already pulled their top savings rates from the market since the August rate cut. If you’re able to lock your cash away for a set period, it could be worth considering a Fixed Term account to receive a higher rate for longer.

60% of savings professionals believe the key thing savers can do now is to ‘lock in the best rates for 12-month terms or longer’.

The next MPC update is six weeks away. With the base rate projected to decline further this year, it’s important to secure higher rates now to maximise your returns.

Our latest report on the UK savings market shows that too few of us are taking advantage of this opportunity.

Inertia: the enemy of savers

The current high-interest environment remains unusually favourable for savers and cash investors. Yet, many savers continue to hold onto old, low-interest accounts. This reflects a common misconception that cash serves only as a safe haven, rather than an active asset that can grow with the right strategy.

Our CEO and Co-Founder, Simon Merchant, comments: “In a market where rates are softening, it pays to do your homework and diversify your savings. Savers who maintain multiple savings accounts with portions of their cash maturing on a regular basis stand to benefit the most.”

The size of the UK savings market stands at £1.5tn. Recent analysis of Bank of England data suggests that as much as £1.1tn of that cash is earning savers less than 2%.

With interest rates on savings account hovering around 5%, you can still secure returns that outpace inflation.

Explore our competitive and exclusive rates

The road ahead

There are only two more MPC meetings scheduled before the end of the year – on 7 November and 19 December.

Financial markets have priced in the possibility of further cuts, but many economists anticipate just one more reduction, likely in November.

Savers should prepare for potential changes and consider moving their cash to higher-interest savings accounts to earn the best returns.

If you’re looking for a simple way to manage and grow your cash for maximum returns, our cash-deposit platform offers the solution. With a single login, unlock access to hundreds of accounts from 60+ banks, including exclusive interest rates.

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