Interest rates kept on hold at 4%

The Bank of England (BoE) has held interest rates at 4%, after cutting them last month.

Interest rates have fallen five times since August last year and are now at their lowest level for over two years.

But inflation has gradually crept up over the last few months and is now at 3.8% - almost twice the Bank of England’s target of 2%.

What are interest rates?

The BoE interest rate is the rate at which the UK’s central bank lends money to commercial banks. 

Interest rates directly impact borrowing costs for loans, such as mortgages and credit cards, as well as the returns on savings.

They’re also the lever that the BoE can pull if it wants to tackle inflation or encourage spending. 

How do interest rates affect me?

Interest rates can have a very real impact on your money in several key areas.

Mortgage rates

When interest rates fall, mortgage rates usually come down too.  

That can push up demand for property and make it cheaper to borrow money to buy a house.

But if rates are lowered, that doesn’t automatically mean mortgage rates will come down too.

That’s because lenders must also consider other factors such as market conditions and risk appetite.

And if you’re on a fixed-rate mortgage, it could be some time before you see any changes.

Credit cards and loans

Lenders can charge more for borrowing when interest rates are high.

So if interest rates come down, that could be good news if you’re repaying a loan.

But that’s not the case if you have a credit cards, as lenders will have their own policies and look at factors like credit risk.

Savings

High interest rates can be unwelcome to borrowers.

But it can often be a good thing if you’re a saver, as you could get better returns on your savings accounts.