Interest rates kept on hold at 4.5%

Interest rates have been held at 4.5%, after being cut last month.

The Bank of England (BoE) has been slowly cutting interest rates since last August - and they’re now at their lowest level since June 2023.

But an uncertain economic backdrop has prompted policymakers to be cautious this time around.

For example, the rate of inflation went up to 3% in January 2025 - a ten-month high, while the economy unexpectedly shrank by 0.1%.

Meanwhile, spending cuts are expected to be announced in the government’s upcoming spring statement, and the US has imposed tariffs on UK steel and aluminium as part of a much wider trade war.

“There’s a lot of economic uncertainty at the moment,” said BoE governor Andrew Bailey.

"We’ll be looking very closely at how the global and domestic economies are evolving.”

But despite holding rates this month, Mr Bailey believes they are “on a gradually declining path”.

What are interest rates?

The BoE interest rate is the rate at which the UK’s central bank lends money to commercial banks. 

Interest rates directly impact borrowing costs for loans, such as mortgages and credit cards, as well as the returns on savings.

They’re also the lever that the BoE can pull if it wants to tackle inflation or encourage spending.

How do interest rates affect me?

Mortgage rates

When the Bank of England cuts interest rates, mortgage rates usually fall as well. 

That can stimulate demand for property and make it cheaper to borrow money to buy a house.

But if the BoE lowers rates, that doesn’t automatically mean mortgage rates will come down too, as lenders must also consider other factors such as market conditions and risk appetite.

And if you’re on a fixed-rate mortgage, it could be some time before you see any changes.

Credit cards and loans

When interest rates are high, lenders charge more for borrowing. 

So a fall in interest rates can be welcome news if you’re repaying a loan.

But that’s not the case with credit cards, as they don’t always follow the bank rate closely, and also depend on factors like credit risk and lender policies.

Savings

While high interest rates can be bad news for borrowers, they can be a positive for savers.

If rates go up, you can get better returns on your savings accounts.