Interest rate rises paused – how will mortgages, savings and annuities be affected?

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With the UK interest rate on hold at 5.25%, we look at the impact on mortgages, savings and annuities.

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

21 September 2023

The Bank of England (BoE) has finally put the brakes on the relentless interest rate hiking cycle – holding at 5.25%.

Pausing rates – coupled with the news yesterday about inflation coming down, indicates greater conviction in the economy, and perhaps the end – or near end – of this rate hiking cycle.

A rise had been heavily pencilled in, but was wiped off the board by the surprise fall in inflation. Even before the BoE announcement, the markets reacted, with implications for savers, mortgage borrowers and anyone considering an annuity.

As the market digested the latest news on inflation, it decided a rate rise wasn’t so likely after all. As a result, bonds started to look comparatively attractive, so money flowed into them, bond prices rose, and yields fell.

Yields are important