Bank of England holds interest rates at 3.75%: What it means for your mortgage and savings

The Bank of England has held interest rates at 3.75 per cent for the fifth meeting in a row, meaning the base rate has stayed the same since December 2025. Rates had been expected to fall this year, but worries about an inflation spike caused by the conflict in Iran have led the Bank to act cautiously.Higher interest rates encourage households to rein in spending and squirrel cash away, because they will get better returns on their savings. This in theory reduces inflation - the increase in the cost of goods and services. Inflation was up 2.6 per cent in the 12 months to June, according to the latest figures from the Office for National Statistics. However, some expect it to hit 4 per cent in the second half of the year due to rising oil prices. The Bank also needs to balance the need to ward off inflation with the risk of slow economic growth and unemployment, which can be a result of keeping rates high. This is what today's decision means for your mortgage and savings. Holding firm: The central bank kept the base rate at 3.75% for the fifth meeting in a rowWhat does this mean for mortgage borrowers?A wave of lenders had already increased their mortgage rates ahead of the Bank of England's interest rate decision.This week, Santander, Halifax and Barclays all hiked prices across their fixed-rate deals as renewed tension between the US and Iran prompts lenders to increase prices. The average two-year fixed rate today is 5.62 per cent according to rates scrutineer Moneyfacts, while the average five-year rate is 5.66 per cent. The cheapest rates, available to those with the largest deposits and good credit ratings, are about 4.5 per cent. It is currently expected that rates could stay at this level for some time. Instead of following the base rate, mortgage rates are heavily influenced by Sonia swap rates, which track future interest rate expectations. Lenders then add their own margin on top. Five-year swaps were 4.32 per cent yesterday, meaning that the financial markets expect mortgage rates to be about 4.32 per cent in five years' time. That is up from 3.98 per cent a month ago. No big changes: Mortgage rates are set to stay around the same level for some time Chris Sykes, a mortgage adviser at MSP Financial Solutions, thinks that rates could fall on the back of today's decision - but only slightly. 'If markets become more confident that Base Rate is likely to remain stable in the near term, swap rates may fall slightly,' he said. 'Even if swap rates remain unchanged, lenders may feel comfortable reducing the margin they apply, particularly in a competitive market where attracting new lending remains a priority.'What to do if you need to remortgageAt a time when rates are elevated, households will want to ensure they're on the best mortgage deal possible. If they need to remortgage soon, that means speaking to a broker or lender and locking in a new rate as soon as they can. It is often possible to reserve a new mortgage rate as early as six months before the current one ends. Someone with a mortgage deal ending even as far as January next year should try to lock in a rate now. If the situation changes and rates begin to fall again, it is normally possible to abandon it in favour of a new one until just before the new mortgage begins. What does this mean for your savings?In general, savings rates rise when the base rate is rising, and fall when it is falling.With the base rate held at 3.75 per cent, savers should expect savings rates to remain fairly static for now.There are already many accounts that can beat the 3.75 per cent Bank of England base rate. You can find the best easy-access savings rates using This is Money's savings rate tables, which are updated daily. Saga Savings is offering an easy-access account with a 4.5 per cent rate, though it includes a 1.64 per cent bonus rate for the first year and will fall to 2.86 per cent after that. Someone putting £10,000 in this account could expect to earn around £450 in interest after a year, if the rate remains the same.It comes with full protection under the Financial Services Compensation Scheme up to £120,000 per person. Various other banks are paying around 4.3 per cent on easy-access savings accounts.However, the majority of easy access accounts pay less than the base rate. The average easy-access savings rate of 2.56 per cent is also below the 2.6 per cent rate of inflation. Savings boost: The best savings rates are paying around 4.5% meaning savers can get a return that beats the current rate of inflation and the Bank of England base rateIf an account pays less than the inflation rate, it means your money is losing value in real terms and you should strongly consider switching to a new account or provider. If you are able to lock your money away for six months or more, you could also consider a fixed rate savings account. Should you take a fixed rate savings deal? While the best easy-access savings accounts with no restrictions pay 4.5 per cent, it's possible to do slightly better with a fixed rate deal.Fixed rates mean you guarantee the rate for the period of the fix, which can be beneficial if rates fall - but there are penalties for taking out cash early. You can find the top fixed-rate savings accounts using This is Money's independent best-buy tables. The best one-year deal is offered by GB Bank and pays 4.92 per cent. A saver putting £10,000 in this account will earn a guaranteed £492 interest over one year. It comes with full protection under the FSCS up to £120,000 per person.Oaknorth Bank and MBNA Bank are also offering 4.86 per cent and 4.85 per cent respectively. Both offer FSCS protection.The best two-year bond pays 4.83 per cent and comes from Kent Reliance and Close Brothers.For those who wish to lock their savings away for longer, Investec offers the best three-year bond paying 5 per cent, while GB Bank has a five-year bond paying 4.98 per cent. Make sure you use your Isa allowance As well as keeping a close eye on their savings rate, savers should consider using a cash Isa if they are not already to protect the interest they earn from being taxed. The annual tax-free allowance is currently £20,000 but will be cut to £12,000 from April 2027, apart from for over-65s, under plans announced in the Budget last year.Rates on Isas are even better than some easy access accounts, and have risen since the base rate was held at 3.75 per cent last month. However, the top deals have limited-time bonus rates after which time the rate falls. The best one on the market is with Hargreaves Lansdown which pays 4.52 per cent.You can find the leading cash Isa rates using This is Money's best-buy savings tables. The best fixed rate cash Isa rates range from 4.67 per cent for one-year fixes to 4.8 per cent for two-year fixes.Best mortgage rates and how to find them Mortgage rates have shot up again due to inflation triggered by the conflict with Iran reversing hopes that the Bank of England would cut rates. This means those remortgaging or buying a home face higher costs.That makes it even more important to search out the best possible rate for you and get good mortgage advice, whether you are a first-time buyer, home owner or buy-to-let landlord.This is Money's partner L&C can help you with its fee-free mortgage service.> Compare mortgage rates> Find the right mortgage for you To help our readers find the best mortgage, This is Money has partnered with the UK's leading fee-free broker L&C.This is Money and L&C's mortgage calculator can let you compare deals to see which ones suit your home's value and level of deposit.You can compare fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes.If you’re ready to find your next mortgage, why not use This is Money and L&C’s online Mortgage Finder. It will search 1,000’s of deals from more than 90 different lenders to discover the best deal for you.> Find your best mortgage deal with This is Money and L&C Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.