Interest rates held at 3.75%

Interest rates have been kept on hold at 3.75%.

The Bank of England’s first rate decision of 2026 comes after four reductions last year, including a cut in December.

Some analysts are predicting a further cut this year, possibly as soon as April.

But for now, the Bank is being cautious amid a mixed economic picture.

For example, growth remains sluggish, activity in the labour market has been cooling, and there was a slight uptick in inflation in December.

How do interest rate decisions affect me?

Today’s decision can have a real impact on both borrowers and savers.

Base rate influences lots of payments

The interest rate set by the Bank of England - also known as the base rate - helps high street banks and lenders decide what rates to set on things like mortgages, credit cards, loans and savings accounts.

So if the base rate changes, banks may adjust their own rates too.

Tracker and variable rate mortgages are linked to the base rate

If you’re on a tracker or variable rate mortgage, your payments will be directly linked to the Bank of England base rate.

So when the base rate goes up, your monthly payments are likely to increase.

And if it goes down, your payments may fall.

But lenders don’t just look at the base rate when setting their own mortgage rates.

They’ll also weigh up factors like market conditions and risk appetite.

And if you’re on a fixed-rate mortgage, your payments will stay the same until your current deal ends.

High rates can make other borrowing more expensive

Higher interest rates mean it usually costs more to borrow money - and that’s particularly important if you have credit cards or loans.

These aren’t always directly linked to the Bank of England base rate, as lenders set their own rates based on factors like market conditions, their costs and your credit score.

This means your rate might not change immediately when the base rate goes up or down.

But over time, higher base rates often lead to higher borrowing costs, while lower base rates can make borrowing cheaper.

Interest rates affect your savings

Higher interest rates can be good news for savers, as they usually mean better returns on savings accounts.

But when rates fall, the interest you earn on savings usually drops too, so your savings won’t grow as fast.

Interest rates can be used to keep inflation under control

The Bank of England can change interest rates to try to keep inflation under control and close to its 2% target.

Higher rates can encourage people and businesses to save more and spend less.

And over time, that can help slow down price raises.

Lower rates have the opposite effect, making it cheaper to borrow and easier to spend, which can push prices up.

So whether you’re a borrower, saver or simply keeping a close eye on your day-to-day expenses, today’s decision matters.