The Bank of England Base Rate will remain unchanged at 5.25 percent, sparking increasing concerns about the potential impact of these 15-year high-interest rates on the economy.
Jatin Ondhia, CEO of Shojin, said: “The Bank of England is walking a tightrope. Understandably, it is unwilling to loosen its grip on inflation by dropping rates any time soon. But it also has to be careful not to inflict excessive damage on the UK’s contracting economy.”
The latest Gross Domestic Product (GDP) figures recorded no growth for the UK economy in the three months to October. Instead, GDP fell by 0.3 percent, with analysts suggesting that with the current high-interest rate environment, “the worst is yet to come”.
Mohsin Rashid, CEO of ZIPZERO, commented: “Pockets across the country remain pinched. Holding the Base Rate steady will certainly save many Britons from another punch to the gut, but it won’t repair the damage of the many blows that have come before.
“With their financial well-being eroded by years of fiscal chaos, much more must be done to uphold those still struggling under the twin burdens of high-interest rates and high inflation.
“Whether it means relief packages from the Government or retailers doing more to keep prices fair and manageable – ideally a mixture of both – what matters most is that it happens now.”
However, Mr Ondhia highlighted that the decision to hold the rate provides a “degree of certainty” for Britons in the short-to-medium term and that the timing “couldn’t be better”.
He explained: “The New Year always brings about a renewed focus on finances as people set their investing, saving and spending goals.
“Higher interest rates are likely to guide more people towards the wide array of ISA products available, but diversification will be another key trend to watch in 2024, with real estate a perennially popular asset.”
He added: “Diversifying one’s savings and investments can help hedge against economic volatility, and as the Bank of England continues along the tightrope, preparing for potential volatility next year will be on many people’s agenda over the coming months.”
Andy Mielczarek, founder and CEO of SmartSave, a Chetwood Financial company, described the impact of the continued freeze on rates as having entered a “period of stability” where interest rates are concerned.
However, he noted: “There is no room for complacency as people consider their financial plans for 2024.
“For the first time in 15 years, the Base Rate is residing above inflation, and savers must consider how they can take advantage of this shift.
“Crucially, we must recall that a higher Base Rate is not a ensure of greater returns on saving pots. Many banks and many savings products – easy-access accounts in particular – are still offering returns that do not even match the 5.25 percent Base Rate, let alone better it.
“So, whether savers consider switching products, providers, or both, it is up to consumers to evaluate their options and seek out the best returns possible.”
