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Bank of England has made its decision on interest rates - an update on potential effects on your finances

Bank of England Maintains Interest Rates, Dashing Hopes of Homeowners Seeking Mortgage Cost Relief

Decision on Bank of England Interest Rates Announced: Here's the Impact on YOUR Financial Resources
Decision on Bank of England Interest Rates Announced: Here's the Impact on YOUR Financial Resources

Bank of England has made its decision on interest rates - an update on potential effects on your finances

The Bank of England (BoE) has announced that it will hold its base rate at 4.00 percent, following the Monetary Policy Committee (MPC) meeting, with a vote of 7-2 in favour of holding rates steady. This decision comes after a recent reduction in interest rates from 4.25 percent in August.

In a statement, Andrew Bailey, the Bank's governor, expressed that inflation is expected to return to the target of 2%, but the economy is not yet out of the woods. Inflation, as measured by the Consumer Prices Index (CPI), remained unchanged at 3.8% in August, marking the highest level since the start of 2024.

The BoE is now reversing its policy of quantitative easing through quantitative tightening, where it gradually sells off government bonds to reduce its balance sheet and manage inflation. The annual target for bond sales has been lowered from £100 billion to £70 billion to avoid destabilizing the bond market.

Meanwhile, the UK economy flatlined in July, with zero growth in gross domestic product (GDP) month-on-month. Food and drink inflation rose to 5.1% in August, marking the fifth month in a row that the rate has accelerated.

In the world of finance, it's important to make informed decisions. If you're in the market for a mortgage, using a mortgage calculator or a mortgage broker can help you find the best buy. Some lenders allow new mortgage deals to be secured up to six months in advance. However, be mindful that leaving a fixed mortgage deal early may incur an early exit fee.

For savers, it's crucial to switch your variable rate account if it no longer pays a decent return on your hard-earned cash. Savings rates have been steadily falling over the past year, with the average easy access savings rate dropping from 2.96% to 2.6%. If saving for a long-term goal, consider locking some of your savings inside a fixed bond, as these usually come with the highest savings rates. It's always wise to have some money stashed inside an easy-access savings account to ensure quick access to cash for emergencies.

When planning to borrow, shopping around and avoiding unnecessary debt is essential. Research price comparison websites such as Compare the Market, Go Compare, and MoneySupermarket to find the best buy savings rates. Fees for mortgages can sometimes exceed £1,000 and should be considered when comparing deals.

Credit card, loan, and overdraft rates are unlikely to change after the announcement due to the base rate remaining unchanged. For pensioners, the base rate remaining unchanged can secure favorable rates for their annuity. To find the best buy credit card rates, visit price comparison websites like MoneySavingExpert's Cheap Credit Club or Compare the Market.

Attention is now shifting to the upcoming November 26 Budget, with speculation that Chancellor Rachel Reeves may have to raise taxes to address a black hole in the nation's finances. The Bank of England has also announced a first auction on short-term bonds worth £775 million, to be held at the start of October, as part of its efforts to manage the economy.

In conclusion, staying informed and making informed decisions about your finances is crucial in these economic times. Whether you're looking to save, borrow, or invest, it's essential to do your research and make the best choices for your financial future.

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