What the latest interest rates vote means for your mortgage, savings and bills
The Bank of England (BoE) on Thursday announced its decision to keep interest rates at 3.75 percent through 2025, following four rate cuts.
The final votes were tight; nine committee members voted 5-4 or 4-5 to cut or keep each time — but on March 19, there was a unanimous 9-0 vote; This reflected how the Iran war had put Britain’s rising energy costs and rising inflation back on the menu, and the vote in April was a similar story, with the final vote being 8-1.
There is an expectation that rising oil prices will lead to a renewal of inflation in the second half of 2026.
Here’s a quick summary of what the current interest rate might mean for you:
What does interest rate mean in housing loans?
Generally speaking, as rising interest rates over the last few years have meant mortgage repayments have also increased, the opposite is also true: lower rates, lower repayments. However, there are a few important points to note.
First, it is only the interest portion of the repayments that needs to change; Your capital repayments will naturally decrease the more you pay off your mortgage. Secondly, the bank rate (the official term!) is not necessarily the rate you are charged. your Bank or lender for mortgage – they set their own rates based on the BoE rate but not necessarily the same.
But more than half a million people have a mortgage that tracks the BoE interest rate and they will see an immediate change in the event of any increases or cuts.
Many more people have fixed-term agreements that expire after perhaps two years, or often up to five, and need to be renegotiated; Almost 2 million homeowners are expected to seek renewed deals in 2026.
If you have a fixed term mortgage scheme you will in no case see a change in repayments until it ends and you start a new scheme, but if you have already finished and moved to a standard variable rate deal you may 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; That’s why many lenders increased their mortgage deals in March to make them more expensive. Although some did not return to previous levels, they have since fallen again.
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What about savings accounts?
If you have money in your savings account, it’s the other side of the seesaw: Falling rates mean you’ll earn less interest; up means you’ll get more.
As there is a fierce fight for customers between banks and building societies, it is still possible to get good deals if you are happy to lock up money for a fixed period or contribute regular amounts; whereas some offer much more than 4 percent, even on easy-access accounts.
There are always terms and conditions that need to be met, so make sure the accounts you open suit your circumstances, but there still remains the opportunity to save and earn money at a rate better than inflation, which currently stands at around 3.3 per cent.
But be aware of the amount of interest you can earn without being taxed. If the interest rate on your savings account is not fixed, banks may change the rate, which you can increase or decrease at any time.
A tax-efficient way to save is to use a cash ISA, where everyone (for now!) has a personal allowance of £20,000 each year, reducing to £12,000 in April next year, with the other £8,000 earmarked for tax-free investing.
Invoices and refunds
Credit card repayments and other types of personal loans are also affected by interest rates, of course, because the amount they require for borrowing may vary.
For credit card users (and especially for buy now, pay later deals), it’s always important to pay the full amount each month if you can, to avoid being charged interest; Depending on your circumstances and account type, it can be one of the more costly ways to borrow money.
Again, lenders may not change their rates immediately after the base rate change, but if you think your repayments could or should be lower, contact them to consider your options.
When it comes to energy bills, they’re likely set to see increases starting in the summer when the next energy price cap comes into effect, as a direct result of the war in Iran driving up wholesale prices for gas and oil.
