Interest rates kept on hold at 4.25%

The Bank of England (BoE) has kept interest rates on hold at 4.25%.

Economists had widely expected rates to remain unchanged this month, despite an uncertain global economic picture. 

Policymakers are keeping a close eye on the impact of a trade war being waged by the US government, which many experts believe will lead to a slowdown in global trade and push up prices.

Meanwhile, the escalating conflict between Israel and Iran has led to concerns about a knock-on impact on oil prices and possible supply issues.

And at home, inflation remained steady at 3.4% in May - above the BoE’s target of 2%.

“Interest rates remain on a gradual downward path, although we’ve left them on hold today,” said Andrew Bailey, governor of the BoE. 

“The world is highly unpredictable.

"In the UK we are seeing signs of softening in the labour market.

"We will be looking carefully at the extent to which those signs feed through to consumer price inflation.”

What are interest rates?

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

It’s important because it affects how much it costs to borrow money and how much you can earn from saving.

Interest rates are also the lever that the Bank of England can pull if it wants to bring down inflation or encourage spending.

How do interest rates affect me?

Mortgage rates

When interest rates come down, mortgage rates usually fall as well. 

So it can be cheaper to borrow money to buy a house.

But this isn’t guaranteed, as lenders will also look at other factors such as market conditions and risk appetite before making any decisions.

It also depends on what type of mortgage you have.

If you’re on a fixed-rate mortgage, your payments won’t change right away. 

But if you're on a tracker or standard variable rate (SVR) mortgage, you might see a difference.

Credit cards and loans

Lower interest rates can make loans cheaper to repay, which is good news if you’re planning to borrow or already have personal loans.

But credit cards don’t always follow the bank rate closely, as lenders will base rates on factors like your credit history, risk and their own specific policies.

Savings

High interest rates can be good for savers, because you might earn more from your savings account or cash ISA.

On the other hand, if rates fall, you may get lower returns.