On 19 June, the Bank of England announced that the base rate would remain steady at 4.25%. This rate serves as a benchmark for banks and lenders to set interest rates on savings accounts, mortgages, and credit cards. Although the inflation rate remains above the bank’s target of 2%, the committee opted for a cautious approach to future rate cuts due to the current global uncertainty. The base rate had previously decreased from 4.5% to 4.25% in May.

In response to this update, personal finance expert Amy Knight urged people to “log in to their banking apps” and verify two crucial details; your savings interest rate and debt interest rates. Failing to do so might result in missing out on up to £778 due to the base rate decision today.

Check the interest rates on your debts

The NerdWallet UK expert commented: “Previous forecasts that inflation would peak at around 3.5% in Quarter three may be thrown out, since this didn’t account for the impact of the Middle Eastern conflict on global gas and oil prices. As a result, borrowers who’ve been banking on rates coming down this summer may need to rethink their repayment strategy.

“Review the interest you’re paying on personal loans, credit cards, Buy-Now-Pay-Later and overdrafts, and identify where you’re being charged the highest rate. Then, consider using a 0% balance transfer card to buy yourself time.

“Relieving immediate financial pressure can help you stage a planned attack on your debts, where you work towards clearing the most expensive ones first.”

The average credit card debt held by UK adults stands at £2,011, with an average APR of 35.7%. This means that over a year, the interest alone would amount to £717.

However, some of the lowest APR deals currently available are at 11%, which would only add an extra £219 in interest payments over a year. This could potentially save £498 compared to the higher APR, and this doesn’t even take into account the savings made on 0% balance transfer offers.

Savings account rate

The expert explained: “If you have money saved in an account paying less than 3.4% (the current inflation rate), your money is shrinking in value. Unless your cash is growing at a similar rate, your household budget is going to get squeezed.

“Moving your savings to an account paying more than 3.5% interest means you’ll gain enough to makeup for the value that inflation steals. The sooner you take this step, the easier it will be to swallow future price increases if CPI remains high for many months.”

Some interest rates currently available on the market are as low as 1.35%. On a £10,000 savings pot, the average amount UK adults plan to save this year, this would earn £135 interest over a full year.

In contrast, an account offering rates above inflation, for example 4.15%, will increase a £10,000 pot by £415. This adds an extra £280 to their savings pot.