Interest rates stay on hold as Iran conflict continues

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

The Bank of England cut rates four times in 2025, and earlier this year, economists were predicting that another interest rate cut could be just around the corner.

But the US-Israel war with Iran has changed the economic landscape considerably, pushing up oil prices past $115 a barrel.

When oil prices go up, we all feel the effects in the form of higher energy bills, fuel costs and prices in the shops.

Inflation rose to 3.3% in March - the first full month of the war - and even if the US and Israel reach a deal with Iran tomorrow, the economic damage won’t be instantly undone.

Against this backdrop, and with the situation in the Middle East remaining hugely uncertain, the Bank of England is staying cautious for now.

What are interest rates?

The Bank of England interest rate is the rate at which it lends money to commercial banks. 

So they can directly affect borrowing costs for loans, such as mortgages and credit cards, as well as the returns you get on your savings.

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

What do interest rates have to do with inflation?

Interest rates can be used to keep inflation under control and close to the Bank’s target of 2%.

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

And that can gradually help slow down price rises.

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

Worried about rising costs?

If you’re struggling with your day-to-day expenses, there are a few practical steps you can take.

Use our household bills calculator

Our free and interactive household bills calculator gives you a personalised forecast of how your monthly costs could change, so there are no surprises when new bills arrive.

It takes just a few minutes to use and the results are tailored to where you live.

Create a household budget

Take a proper look at your income and expenses, so you can prioritise your spending and be sure you’ve got money available for vital costs like bills.

Check out our guide to how to create a budget to get started.

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

Find out what benefits you can claim 

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

So use our benefits calculator to see what you could be entitled to claim. 

It might be more than you think.

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.

We’ve put together useful tips on key priorities like:

• how to save energy
• how to keep the cost of your food shop down
• 50 ways to cut your fuel costs
• how to lower the cost of your holiday

And don’t forget to check back here regularly for our round-ups of standout deals and low-cost recipes that can save you money in the supermarket.