The Bank of England’s Monetary Policy Committee has voted to hold the base rate at 4.25%, following last month’s 0.25 percentage point cut. Hopes of further reductions were dashed after inflation unexpectedly rose to 3.5% in April, according to the Office for National Statistics (ONS).
Though the latest data shows inflation eased slightly to 3.4% in May, concerns remain. Economists have urged the Bank to tread carefully with further rate cuts, aiming to bring inflation closer to the 2% target.
However, the picture looks different for homeowners facing the end of fixed mortgage deals this year. Many would welcome sharper rate cuts to ease financial pressure. Despite the May base rate cut, average mortgage rates have barely shifted: five-year fixed deals dipped by just 0.01 percentage point to 5.09%, while two-year fixes dropped 0.06 points to 5.12%.
Savers, meanwhile, are grappling with the effects of inflation outpacing returns. Some high-street easy access accounts offer an average rate of just 1.56%, well below inflation. Better returns can be found elsewhere – top easy access accounts now pay over 4.50% AER.
Those concerned about breaching their Personal Savings Allowance (PSA) might consider a cash ISA. This is especially relevant for higher-rate taxpayers, who receive only a £500 PSA compared to £1,000 for basic-rate taxpayers. While the average rate on easy access ISAs dipped slightly to 2.98% in June, leading deals continue to offer rates above 4.50% AER.
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