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Bank of England holds base rate at 5.25% yet again – what it means for your savings and mortgage

The Bank of England held the base rate at 5.25% for the fourth time in a row on Thursday 1 February. This rate is used by the central bank to charge other banks and lenders when they borrow money – and so it influences what borrowers pay and what savers earn.

The base rate has been held at 5.25% since August 2023 when it rose from 5%. This is the highest the base rate has been in 16 years.

I have a mortgage – what happens now?

Since the last time the base rate was held, variable-rate mortgages have remained largely unchanged, while fixed rates have fallen a fair amount – the cheapest two-year fix is currently 4.17%, compared to 4.74% in December 2023.

For more on what could happen to mortgage rates in the near future, you can watch MoneySavingExpert.com founder Martin Lewis's recent video explainer.

Here are the key need-to-knows for mortgage borrowers:

  • For those on a fixed mortgage deal, there's no change for now – but make sure to check for rates if your deal is ending soon. The amount you pay WON'T change during the fixed period, regardless of what happens to the base rate. Though this also means you're locked in if interest rates were to come down.

    If you want price certainty and you're close to the end of your current term, you might want to search for a new mortgage deal now. You can usually lock in a mortgage offer six months ahead of time. This will give you insurance against any rate rises, plus the flexibility to switch to a cheaper deal if one launches before your current rate finishes. 

    If your fix is ending sooner you could consider a tracker that doesn't come with early repayment charges. Then, if rates come down over the coming months, you could move onto a fixed deal penalty-free at a time of your choosing. However, bear in mind that trackers are currently around 1.2 percentage points more expensive than the cheapest fixes – so you'd need rates on fixes to come down substantially to make it worth being on a more expensive tracker rate in the meantime.

  • If you're on a tracker mortgage that 'tracks' the base rate, then again there's no change. Though as above, check if you can switch to a better rate if your deal is coming to an end.
  • If you've got a standard variable rate (SVR) mortgage, these can already move at the whim of lenders. You're usually moved onto one after your fix or tracker ends. However, SVRs are typically more costly than fixed and tracker deals – currently they tend to range between around 7.5% and 8.5%. So, you should check if you can save by switching now. If you're waiting for fixed deals to come down, you may want to consider a tracker with no exit fees in the meantime.

To find out more about the pros and cons of locking in a product transfer or remortgaging early, see our Getting ready to remortgage guide.

Struggling with the cost of your mortgage? See our guide on What to do if you're struggling to pay. If you've already fallen behind on your repayments, see our Mortgage arrears guide.

I'm a saver – what happens now?

Since the base rate was last held in December, savings rates have fallen across the board. For example, the top one-year fix at the time paid 5.66%, while the top one-year fix now pays 5.16%. 

With the base rate being held again, it's very unlikely rates will improve, and they could fall further still – though the exact impact is yet to become clear.

The first step to maximising your savings is to check what rate your provider is paying – if you're earning less than the top easy-access rate, which is currently 5.15%, you should consider switching. Our current best buys are as follows:

  • Up to 5.15% on easy-access. The top payer is currently Coventry Building Society. You can open the account with just £1 but you can only make three fee-free withdrawals a year.

    If you know you'll need access to your savings more often, Cynergy Bank pays a slightly lower 5.1% (minimum £1 deposit) and offers unlimited withdrawals – yet the interest rate drops to 4% after 12 months, so diarise to ditch and switch then.
  • Up to 5.5% on a notice account. Vanquis Bank is offering 5.5% for 90 days' notice with a minimum deposit of £1,000. If you need a shorter notice period, West Brom Building Society offers 5.25% for 60 days' notice with a minimum £1 deposit.
  • Up to 5.16% on a one-year fix. SmartSave currently offers the top rate at 5.16% with a minimum deposit of £10,000. If you have less to save, Investec offers a slightly lower 5.15% rate and can be opened with £5,000.

    However, it's worth noting that the top easy-access account, Coventry Building Society only pays slightly less than this, so it might be worth opening an account with them instead of locking your money away for a year.

For the latest rates, see our Top savings guide – we update it daily. Remember, if you've saved with an authorised bank in the UK, you benefit from the protection of the Financial Services Compensation Scheme – see our Savings safety guide for full details.

Made a considerable amount of interest on your savings? If you've started to pay tax on it, you may want to consider putting that money in a cash ISA instead – for more info, see our Top cash ISAs guide.

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