Interest rates held at 5%

Interest rates are being held at 5% by the Bank of England after it dropped them last month.

The decision comes after inflation remained at 2.2% last month when interest rates were slashed from a 16-year-high of 5.25%.

While inflation is just above the Bank's target of 2%, it has warned us not to expect a sharp fall in interest rates anytime soon. Experts are predicting cuts in November.

Last month's decision to lower interest rates was a close call, with five out of nine members of the Monetary Policy Committee (MPC) voting for a quarter-point reduction.

What is the Bank of England interest rate?

The Bank of England interest rate, also known as the bank rate or base rate, is the rate at which the UK’s central bank lends money to commercial banks. Interest rates have a direct impact on borrowing costs for loans, such as mortgages and credit cards, as well as the returns on savings.

The base rate is set eight times a year. The decision is made by MPC, which has nine members, including the Bank of England’s current governor, Andrew Bailey.

How do Bank of England interest rates affect me?

Bank of England interest rates have a major say in how the country’s economy unfolds. Think of it as a dial that the bank twists lower to encourage spending or higher to rein in inflation.

Mortgage rates

When the Bank of England lowers its interest rate, mortgage rates usually follow suit, so it’s cheaper to borrow money to buy a home. More affordable mortgages can also spark a surge in housing demand.

Savings

On the flip side, high interest rates are a win for savers. If rates rise, your savings accounts can earn you better returns.

Credit cards and loans

Interest rates also play a role in your credit card and loan bills. When rates are high, lenders charge more for borrowing. But if rates drop, you might find that credit card and personal loan repayments are less of a strain on your wallet.