The Bank of England (BoE) announced on Thursday its decision to hold interest rates at 3.75 per cent, following four cuts across 2025.
Recent votes have been tight affairs, the nine committee members swinging 5-4 or 4-5 to cut or hold each time – but on 19 March there was a unanimous 9-0 vote, reflecting how the Iran war had put soaring energy costs and rising inflation back on the menu for Britain, and April’s vote was a similar story, 8-1 the eventual vote.
There is an expectation that soaring oil prices will now lead to renewed inflation in the second half of 2026.
Here’s a brief rundown of what the current interest rate might mean for you:
What does the interest rate mean for mortgages?
Broadly speaking, as increasing interest rates over the last few years have meant mortgage repayments going up, then the reverse also holds true: lower rates, lower repayments. However, there are several important things to note.
Firstly, that it’s only the interest part on the repayments which should change – your capital repayments will naturally decrease the more you pay off your mortgage. Secondly, the bank rate (official term!) isn’t the rate you are necessarily charged by your bank or lender for the mortgage – they’ll base theirs off the BoE rate but it doesn’t have to be the same.
More than half a million people do, however, have a mortgage that tracks the BoE interest rate, and those would see an immediate change in the event of any rise or cut.
Far more people have fixed-term deals, which expire after perhaps two years, or often up to five, and need renegotiating – almost 2 million homeowners are expected to seek renewed deals in 2026.
If you’ve got a fixed term mortgage plan, you won’t see a change in repayments in any case until that comes to an end and you start a new one, but if you’ve already finished and moved onto a standard variable rate deal, then you might see a change in your repayments.
New mortgage products tend to be based on swap rates – market agreements based on future expectations of interest rate movements – rather than the current bank rate, which is why many lenders raised their mortgage deals to make them more expensive across March. Some have since fallen again, though not back to previous levels.
What about savings accounts?
If you have money in a savings account, it’s the other side of the see-saw: rates going down mean you’ll earn less interest; up means you get more.
As there has been a bit of a fierce battle raging among banks and building societies for customers, it’s still possible to get good deals if you are happy to lock in money for a fixed period of time or contribute regular amounts, while several are offering far more than 4 per cent even in easy access accounts.
