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The Bank of England’s Monetary Policy Committee (MPC) voted by 6-3 to leave the base rate unchanged at 3.75% in September, with three members wanting to raise rates to 4%, amid concerns that we could see a jump in inflation in coming months.
The Consumer Prices Index (CPI) measure of inflation rose to 3.1% in the year to August, up from 2.8% in July. Higher energy bills in coming months are expected to push inflation up further.
Markets previously were pricing in two further rate cuts in 2026 but the Monetary Policy Committee has made it clear that it is poised to respond to inflationary pressures, which means rates may be more likely to rise rather than fall.
Ed Monk, Pensions and Investment Specialist at Fidelity International, said: “It’s another round of wait-and-see at the Bank of England, but the potential for a rise in rates has not gone away.
“The Bank can’t control global energy prices, but the longer those pressures persist, the greater the chance that we see more widespread and entrenched inflation, something the Bank will be keen to avoid. It is watching closely for signs that energy price spikes translate into higher wages and rising ‘core’ inflation – the rate of prices rises once volatile elements like energy have been stripped out.
“Those second-round effects are signs of an inflationary spiral, and we should expect the Bank to quickly become more hawkish if they emerge. Three MPC members already believe a precautionary rate rise is justified to head off these risks.
“The majority, however, remain unconvinced for now. They will hope that higher prices, alongside increased rates on consumer credit and mortgages, can act as a brake on demand without the need for an official rate rise.”
Here, we explain what September’s rate hold might mean for you and your finances.
Your savings
Savings rates remain competitive, but it’s still important for savers to take advantage of inflation-beating returns whilst they’re still available. According to Moneyfacts, over 190 easy access accounts could better the rate of inflation at the time the latest numbers were issued, with some of the most competitive options currently offering 4.00% or more.
Veronika Lovett, chief executive at Kroo Bank, said: “The base rate may not be moving, but that doesn’t mean savers cannot secure an improved return on their money. It’s one thing to get a good return from a savings account, millions of people have money sitting in bank accounts paying nothing. If you ensure you are getting the best value from all of your financial products, whether that’s savings accounts or bank accounts, then you’ll be better able to deal with the inflationary pressures expected over the rest of the year.”
You can find the current best fixed savings rates in our article Where can I find the best fixed savings accounts? and the best cash ISA rates in our guide Best cash ISA rates – which cash ISAs pay the most interest?
Those with longer-term savings goals – more than five years and preferably at least 10 – and who are comfortable accepting a level of risk, may want to consider investing some of their money in the hope of generating inflation-beating returns. However, remember that there’s a chance you could get back less than you put in, so investing isn’t for the faint-hearted, especially given current volatility.
Find out more about whether investing some of your savings could be right for you in our guide Investing – the basics.
What you can do
As mentioned, it’s essential to make sure your savings are working as hard as they possibly can for you, as often banks lure savers in with tempting rates only to reduce them a few months later.
Check savings websites such as Moneyfactscompare.co.uk or Raisin, or price comparison sites such as uSwitch or GoCompare to see if you can find a higher interest-paying account to move to.
If you have money in a fixed rate savings account and you think you could do better elsewhere, check what the penalties are for closing your account. In some cases, it may just be a few months’ interest, and you may be better off moving your money to an account paying higher returns.
Your pension
If you’re approaching retirement and considering using some or all of your pension savings to buy an annuity to provide you with an income, the rate hold is positive, as when rates are higher, this usually means you’ll get more for your money than previously.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown said: ““Rates on hold is good news for anyone in the market for an annuity. Annuities have enjoyed a surge in popularity in recent years as rising interest rates sent retirement incomes soaring. Annuity rates have remained robust with the latest HL annuity portal data showing a 65-year-old with £100,000 could secure up to £8,030 per year from a single life level annuity with a five-year guarantee.
“If you’re considering an annuity, make sure you do your research. Annuity rates are high, but different providers offer different rates, so shopping around is crucial to ensure you don’t miss out. An annuity can’t be unwound, so you need to be confident that you’ve made the right choice.”
Find out more in our articles Annuity incomes reach record high – is now the time to buy?, Annuities explained and Why it pays to shop around for your annuity.
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If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide Chartered independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial adviser. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 2,600 reviews on VouchedFor, the review site for financial advisers.
Your mortgage
The Bank’s decision to hold the base rate at 3.75% will come as a relief to homeowners, many of whom are facing a sharp jump in their monthly payments when their fixed rate deals come to an end, but unfortunately it doesn’t mean rates won’t continue to creep up.
Sarah Coles, head of personal finance at AJ Bell, said: “Mortgage misery is set to intensify. Fixed rates are set in the swaps market, which is driven by bond prices, which in turn move according to rate expectations. It means forecasts of more rate rises further down the line feeds into higher mortgage rates. As a result, we’ve seen major lenders hike rates yet again – for the second time in a month, and this may not be the last of it.”
If your current mortgage deal is finishing soon, you can find out about remortgaging in our article Five good reasons to remortgage now. Learn why mortgage rates move even when the base rate has stayed the same in our guide What are swap rates and how do they affect my mortgage
What you can do
If you’re on a standard variable rate (SVR), you should remortgage to a cheaper deal if possible, as SVRs are usually the most expensive mortgage rates. You might also want to start looking around for a new deal now if your current mortgage deal is due to end in the next few months, as you can usually secure your next mortgage three to six months before you want it to begin.
Ms Coles said: “If you have a remortgage on the horizon – within the next six months – it’s worth locking in a deal now. If rates rise as expected in the interim, you will have secured a relatively affordable mortgage, and if they don’t, you can shop around again closer to the time.”
If you’re planning to remortgage and are looking for a place to start, we have a mortgage affordability calculator, which will give you a rough estimate of what you might be able to afford, based on current market conditions.
Once you have a rough estimate, it can be helpful to compare different mortgage options to understand what your monthly repayments are likely to be.
Unless your situation is very straightforward, you may want to seek professional advice from a broker to find the best mortgage option for you. The advantage is that they will know which banks and building societies are more likely to accept your application. It’s definitely worthwhile if you are self-employed (unless you have been so for years) or your credit rating isn’t excellent.
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Want to speak to a mortgage adviser? Speaking to an experienced adviser can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 2,600 reviews.
If you’re finding it hard to keep up with your mortgage repayments, please don’t suffer in silence. Our article What can you do if you can’t pay your mortgage? explains what to do if you’re struggling with higher costs.
Your credit card and loans
Borrowing costs are unlikely to change given that rates have been held, but with an uncertain economic outlook, it remains important not to take on more debt if you can possibly avoid it.
If you have expensive short-term debts, it’s worth considering paying them down, and if you don’t have an emergency savings safety net to cover 3-6 months’ worth of essential expenses, it’s worth beefing them up if you can afford to do so.
What you can do
If you’re paying a high rate of interest on your credit card borrowing, try and get a 0% balance transfer credit card deal, so that you can pay off what you owe without being hit by hefty interest charges. Remember though that you must try and clear your balance in full before the introductory 0% period ends, or you’ll start being charged interest.
If you can’t get one, you have the right to reject the interest rate rise within 60 days and close your credit card account. The credit card company must then give you a reasonable time to pay off the money you owe.
If you’re worried that you won’t qualify for a 0% credit card deal, there are several credit checker and credit matcher tools available – and some credit card companies will also give you an indication of whether you’d be successful before you apply.
If you have a loan which you want to pay off quickly, lenders must allow you to do this, although you may be charged an early repayment penalty to do so. Lenders can charge you up to two months extra interest if you choose to pay back your loan sooner than planned. If your loan has less than 12 months left to run, they can only charge you a penalty of up to one month’s interest if you pay it off early.
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