19 December 2024
If you are covering what the latest Bank of England interest rate decision means for your money, please see the following comment from Holly Tomlinson, financial planner at Quilter:
"Today’s decision by the Bank of England to hold interest rates steady will not be the Christmas present those remortgaging or looking to buy will have been hoping for. However, for savers and some investors, the hold offers stability for now. Looking ahead to 2025, at least two small rate cuts of 0.25% are expected, which could shift the financial landscape. Here’s what today’s announcement and the forward outlook mean for your money, including the impact on savings, mortgages, investments, retirement income, and credit."
Savings
"The continued high rates are a win for savers, with attractive returns still available on savings accounts and cash ISAs. However, with rate cuts likely next year, locking in a fixed-rate account now could protect your money from the impact of falling interest rates. If you haven’t reviewed your savings recently, now is a good time to shop around for competitive deals as they won’t be around forever."
Mortgages
"For homeowners and buyers, the hold means there’s no immediate relief. Those with tracker or variable-rate mortgages will see no changes to their repayments, and fixed-rate products remain expensive compared to pre-pandemic levels. While the expected cuts in 2025 could bring some respite, they are likely to be small and gradual, meaning rates will remain relatively high. If you’re approaching the end of your fixed term, start exploring options with a broker now to avoid surprises."
Investments
"Stable interest rates can help maintain market balance, providing clarity for investors. Lower rates expected next year may make stocks and bonds more appealing as cash returns decrease. However, economic uncertainty still looms, so it’s wise to review your investment strategy, ensuring it aligns with your goals and tolerance for risk. Diversification will remain key in navigating this environment."
Retirement income
"High interest rates have supported better annuity payouts, but retirees should be aware that next year’s anticipated rate cuts could make annuities less attractive. If an annuity is part of your retirement plan, acting soon might secure a higher income. Those using drawdown strategies should take this period of stability to review their portfolios and ensure they balance immediate income needs with long-term growth potential."
Credit
"Higher interest rates mean borrowing remains expensive, whether you’re using a credit card, personal loan, or car finance. With today’s decision to hold rates, credit costs won’t rise further for now, but they are unlikely to fall significantly in the short term. For those planning to borrow, it’s important to shop around and avoid taking on unnecessary debt, as rates will remain higher than they were just a couple of years ago."
Looking ahead
"The Bank of England’s decision to hold rates reflects a cautious approach to balancing inflation control with economic growth. While rate cuts in 2025 are expected, they will likely be gradual, meaning the era of “cheap money” is behind us. For savers, borrowers, and investors, the key is to plan ahead, review your financial situation, and seek advice where needed to ensure you’re well-prepared for the year ahead."
