Bank of England keeps interest rates on hold

Interest rates have been kept on hold at 3.75% for another month.

That’s the fifth time in a row that the Bank of England (BoE) has decided to freeze rates.

The decision suggests the BoE’s Monetary Policy Committee is taking a cautious approach amid an uncertain economic outlook.

Hostilities between the US and Iran have resumed in recent weeks and led to oil prices heading upwards once again.

And with Ofgem’s energy price cap increasing by 13% in July, the inflation rate could also start ticking up in the coming months.

At the same time, there’s been the small matter of a new PM taking office, with Andy Burnham already announcing measures to ease the cost of living, such as removing VAT from household electricity bills.

So with more policy announcements likely, the BoE is waiting to see how the situation unfolds before changing interest rates.

What are interest rates?

The BoE interest rate is the rate at which it lends money to commercial banks, so they can directly affect borrowing costs for loans.

If, for example, you have a tracker or variable rate mortgage, your payments will be linked to the BoE base rate and will go up if the rate increases.

But higher interest rates can be good news for savers, as you’ll get a larger return on your savings.

How are interest rates connected to inflation?

The BoE adjusts interest rates to control inflation and keep it close to its target of 2%.

When inflation is high, rates may be increased so people will be encouraged to save more and spend less.

That can, in turn, help to slow down price rises.

Once inflation is at or near the target, the BoE may hold rates steady or even cut them.

Inflation slowed from 2.8% to 2.6% in the year to June.

Worried about rising costs?

If your day-to-day expenses are putting you under pressure, there are a few practical steps you can take.

Create a household budget

Make sure you know exactly how much money you’ve got coming in and going out.

With these numbers in front of you, you can prioritise your spending, work out where savings can be made, and be sure you’ve got money available for essential expenses like bills.

We’ve put together a guide on how to create a budget to help you get started.

And give our budget planner a try - it’s free and easy to use.

Check what benefits you can claim 

You may be eligible to receive financial support if you’re struggling.

So get in touch or try our benefits calculator to see what support you could be eligible for.

It might be more than you realise.

Get help with your debts

If you’re feeling the pressure of debt, contact us for confidential, practical and impartial debt advice.

Check our regular money saving tips

We’re always here with handy advice on how you can save money, such as:

• how to save energy
• how to keep the cost of your food shop down
• 10 ways to keep back-to-school costs under control
• 50 ways to cut your fuel costs

It’s also worth checking back here regularly for our latest round-ups of standout deals and low-cost recipes that can save you money in the supermarket.