Bank of England holds base rate at 5.25%: what it means for mortgages and savings

The Bank of England has again voted to keep the base rate at 5.25%.

It's the sixth time in a row that the Bank's Monetary Policy Committee has opted to keep the base rate unchanged. Before this, there had been almost two years of consecutive hikes.

Here, Which? explains what a steadying base rate means for your finances, and when the rate might finally begin to fall. 

May's base rate decision

The Monetary Policy Committee (MPC) has voted by a majority of seven to two to keep the base rate at 5.25%. 

Two members voted to reduce the rate by 0.25 percentage points to 5%. 

The decision was widely expected across the money market as the Bank continues its efforts to rein in inflation.

• Find out more: how the base rate works 

When will the base rate fall?

This depends on what happens to inflation.

The Bank predicts that inflation (currently 3.2%) will return to close to its target of 2% in the 'near term', but will increase to around 2.5% in the second half of this year due to energy price changes. 

In its announcement today, the Bank stated that 'progress is encouraging', but it 'needs to see more evidence that inflation will stay low before changing the base rate'. 

The base rate will next be reviewed on 20 June 2024.

• Find out more: what's happening to inflation?

How does the base rate freeze impact my mortgage?

A freeze for mortgage holders on a variable deal linked to the base rate is good news as their mortgage bill will remain the same.

The steadying rate means people on soon-to-end fixed-rate mortgages might also breathe a sigh of relief, the hope being that mortgage rates will go down before they have to remortgage.

Since the last base rate decision in March, mortgage rates have risen slightly, with lenders repricing due to the likelihood of the base rate remaining higher for longer.

• Find out more: best mortgage rates 2024

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What if I can't afford my mortgage?

By entering your details into our mortgage repayment calculator, you'll be able to see how your current payments could change if you had to pay a higher rate.

Our guide on what to do if you can't pay your mortgage outlines what support might be available if you're struggling to meet your monthly bill.

What does the base rate freeze mean for savings?

In theory, the base rate freeze should see interest rates on savings accounts remain steady. However, providers could start to factor in potential falls in future and start lowering rates.

Excluding accounts with limited withdrawals or other restrictions, the best instant-access savings rate is currently 5.2%.

If you're willing to tie up your savings for two years, the best rate currently available is 5.05%.

The top one-year cash Isas offer rates of around 4.7%.

• Find out more: best savings accounts

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