The Mirror rounds up what you need to know about the latest Bank of England interest rates decision and what it means for your mortgage, debt and savings
The Bank of England has held its base interest rate at 3.75% amid fears the conflict in the Middle East could drive up UK inflation.
Governor Andrew Bailey today said the Bank will “assess how events unfold” in Iran as members of the Monetary Policy Committee voted unanimously to keep rates on hold.
Energy costs are now expected to increase this summer off the back of soaring oil and gas prices in recent weeks, due to disruption in the Strait of Hormuz, while petrol and diesel costs have already gone up.
Mortgage lenders have also been hiking rates on the back of the conflict, prompted by a sharp rise in swap rates, which reflect market expectations of future Bank of England decisions.
Prior to the Middle East conflict, analysts had been predicting a cut in the base rate for this meeting.
The Bank of England today announced it has raised its forecast for inflation from 2% in the third quarter of 2026 to as much as 3.5% because of the recent spike in wholesale energy prices.
Inflation measures the rate at which the prices of goods and services increase and is currently at 3%.
The Bank of England uses its base rate – which affects the interest that is applied to mortgages, loans and saving accounts – to try and keep inflation under control.
The idea is that when interest rates are higher, people will spend less as their borrowing costs have increased – this in turn then helps slow down demand, which leaves businesses less able to raise prices, and price increases should slow down.
The Bank of England has a target of 2% inflation and meets every six weeks to discuss whether to change its base rate. At its highest point, inflation reached 11.1% in October 2022.
How it affects your mortgage
If you have a tracker mortgage, then this follows the movement of the base rate. As the base rate has not changed today, then you won’t see any immediate change to your monthly repayments.
If you have a standard variable rate (SVR) mortgage, then it is down to your mortgage lender to decide if they pass on any base rate changes. But as no change has been announced today, your payments will likely stay the same.
If you have a fixed rate mortgage, you have agreed to pay a fixed amount every month for a set period of time. This means your payments are not affected by the base rate and won’t change until your fixed deal has ended.
Ben Thompson, Director of Home Moving Strategy, Mortgage Advice Bureau, said: “Rate movements can feel unsettling, but mortgage markets often price in expectations well in advance, meaning the impact on new deals may be less significant than many fear.
“For homebuyers and current homeowners, the key message is not to panic. Focus on understanding your options rather than rushing into decisions, particularly in this fast-moving market.
“If you’re within six months of your current mortgage deal ending, it’s worth locking in a new rate now. Many lenders allow you to secure a deal in advance and switch if rates fall, offering a useful ‘insurance policy’ against ongoing uncertainty.”
How it affects your debt
If your credit card is linked to the base rate, then your interest rate can change when it is updated. The average credit card purchase APR is around 35%, according to Moneyfacts.
As there is no change to the base rate today, you should not see any changes to your credit card if it is linked to the base rate. Not all credit cards are linked to the base rate. As most credit card rates are variable, they can change from time to time anyway.
Interest rates on personal loans and car financing are normally fixed. This means if you’re in the middle of an agreement, this should not change even when the base rate is updated, as you have already agreed set repayments.
However, a change in the base rate can impact the rates that are applied to new agreements.
Charlie Evans, Money Expert at Compare the Market, said: “For borrowers with credit cards or personal loans, rates are unlikely to shift immediately following the Bank’s decision to hold.
“But it’s worth noting that many providers set their own rates independently of the Bank of England. This means you could still find a more affordable deal by comparing what’s available, depending on your credit score and the type of card you’re applying for.
“For those thinking about taking out a loan or a credit card, make sure you make the minimum payments on time and don’t borrow more than what you can afford to pay back.”
How it affects your savings
Savings rates have come down a bit from their recent highs, but there are still plenty of deals that may more than the current rate of inflation.
If your savings rate is variable, it can change from time to time, but if your money is locked into a fixed-rate account, then your rate won’t change.
MoneySavingExpert.com lists the best rates currently available, and cash ISAs currently pay more than standard easy-access accounts.
The best rate on an easy-access cash ISA is 4.68% from Trading 212 for new customers. This includes a 1.08% newbie bonus. You can pay up to £20,000 into an ISA each tax year and any interest you make is free from tax.
The best rate on a standard easy-access account is 4.5% from Chase for new customers. This includes a 2.25% newbie bonus.
If you can afford to lock your cash away, MSE says the top fixed rate account is from Chetwood Bank and this pays 4.4% for a five-year fix.
For a shorter fix, MSE says the best rate for a one-year fixed account is 4.36% from MBNA.
Regular savings accounts offer the best rates, but these come with strict terms and conditions. You can normally only make small deposits each month and some accounts restrict how many withdrawals you can make.
Principality Building Society pays 7.5% fixed for six months but you can only deposit up to £200 each month.
Jenny Ross, Which? Money Editor, said: “If you have a variable rate account, be sure to keep a close eye on your rate and switch away if necessary – digital banks will often still have more competitive rates available than their highstreet counterparts.”
