Interest rates held at 4%

Interest rates have been kept on hold at 4% for the second month in a row.

Since August last year, the Bank of England (BoE) has cut interest rates five times.

But the BoE’s Monetary Policy Committee is now taking a more cautious approach as the economic picture remains mixed.

For example, growth has been sluggish in recent months, the unemployment rate is ticking up and private sector wage growth has cooled.

But price pressures have started to ease, with the UK inflation rate staying at 3.8% in the year to September.

We’re also just weeks away from a Budget, when the chancellor is widely expected to announce tax rises.

What are interest rates and why do they matter?

The BoE’s interest rate - also known as the base rate - influences the rates that high street banks and lenders set for everything from mortgages and credit cards to loans and savings accounts.

If the base rate goes up, borrowing becomes more expensive, but savers can get better returns.

And if it goes down, borrowing gets cheaper, but the interest you earn on savings usually drops too.

The BoE can also change interest rates to try to keep inflation close to its target of 2%.

Raising rates can nudge people and businesses to save more and spend less, which, over time, can help slow price rises.

How do interest rates affect my mortgage?

If you have a tracker or variable rate mortgage, your payments will be directly linked to the BoE base rate.

So if the rate goes up, the amount you pay increases, and if it goes down, the amount you’re charged will fall.

But lenders don’t just look at the base rate when setting their own mortgage rates, as they’ll also weigh up factors like market conditions and risk appetite.

And if you’re on a fixed-rate mortgage, you won’t see any change until your deal ends.

How do interest rates affect savers?

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

What if I have credit cards or loans?

High interest rates can make it more expensive to borrow money.

So if interest rates fall, repaying loans may become cheaper.

But that’s not the case if you have a credit card, as lenders tend to set their own rates based on market conditions and other factors like your credit score.