Bank of England votes to hold interest rates in boost for homeowners – what it means for your money

THE Bank of England has voted to hold interest rates at 3.75% in a boost to borrowers, despite fresh uncertainty in the Middle East. The Bank’s Monetary Policy Committee (MPC) voted to hold interest rates today, despite the ongoing war in the region and US threats raising concerns that costs could rise and the bank will have to take action. Governor of the Bank of England Andrew Bailey said: “Today, we’ve held Bank Rate at 3.75%. “Inflation has fallen faster than we’d expected, but the conflict in the Middle East continues to mean high and volatile energy prices. That will cause inflation to rise again later this year. Sign up for the Money newsletter Thank you! “However the conflict unfolds, our job is to make sure any increase in inflation is temporary and that it comes back to our 2% target.” Inflation is expected to rise further later this year, higher than previous estimates. Many had hoped that the rate of price rises would slow towards the end of 2026 but the war has meant they are now likely to rise back to 3.25% later this year as higher energy costs feed into household bills from July. In recent weeks economists have predicted that interest rates will remain sticky at 3.75% for the rest of the year. But the end of the ceasefire between the US and Iran has raised concerns that it could drive inflation higher. Oil prices have surged above 100 dollars a barrel for the first time since May as attacks on shipping in the Red Sea and threats from president Donald Trump could cause further supply disruption in the area. Most read in Money Meanwhile, the conflict has also disrupted the transportation and supply of energy, which has raised its price and pushed up households’ fuel costs and utility bills. The bank added that as a result it is difficult to predict what is going to happen. Thomas Pugh, chief economist at RSM UK, said if rates remain at this level then interest rate rises are likely. He said: “If they remain close to 100 dollars per barrel over the summer, a September rate hike would move firmly onto the table, with another in the winter likely. “However, if there is another peace deal and prices drop back a little, we think a weakening labour market and deteriorating economic outlook will keep the Bank on hold this year, before cutting three times in 2027.” What it means for your money Homeowners who are currently locked into a fixed-rate mortgage deal will not be affected by today’s news. Meanwhile, those who are on a standard variable or tracker deal, which are more affected by the base rate, will also not see their bills rise. But more than 1.8 million borrowers are set to see their fixed-rate mortgage deal expire this year, according to trade body UK Finance. Higher interest rates can also make it more expensive to borrow money on a credit card or personal loan. However, for savers it’s good news. The chance of rising interest rates means that banks are likely to push up the return they offer on your cash – meaning you make more. Henrietta Grimston, chartered financial planner at wealth management firm Saltus, said: “As inflation remains volatile and interest rates remain elevated, savers should shop around to ensure they are getting the best rates available on their cash deposits. “With rates currently expected to remain elevated into 2026 and into 2027, we will likely continue to see attractive savings rates in the short-term, noting that locking into a rate today may prevent you from benefiting from a higher rate should it arise but will ensure guarantee that rate for a period of time.” Comment now