Bank of England Holds Base Rate at 3.75% – What Does It Mean for You?

The Bank of England held the UK’s base rate at 3.75% due to uncertainty over the impact of energy prices.

It’s the fourth consecutive decision made by the Monetary Policy Committee (MPC) to keep the base rate unchanged.

Andrew Bailey, the Bank of England’s governor, announced that although a recent fall in oil prices was “encouraging,” higher energy bills caused by the conflict in the Middle East left “inflationary pressure in the pipeline.”

The base rate influences how the cost of borrowing and how much interest is paid to savers.

It’s also the main measure used to control inflation, which is how much the price of goods and services increases.

The Bank of England is in charge of making sure that inflation doesn’t go above 2%, currently, the inflation rate is 2.8%.

Here’s what the base rate decision means for borrowers and savers.

How does the base rate decision affect borrowers?

Generally speaking, mortgage rates tend to rise and fall depending on the base rate decision.

Borrowers on Standard Variable Rate (SVR) mortgages tend to experience this change the most, as lenders can adjust interest rates at any time.

For the time being, mortgage rates are likely to remain largely unchanged since the base rate stayed the same.

If you’re looking for a new mortgage deal it’s always important to shop around and compare providers to get the best rate.

How does the base rate decision affect savers?

Savers tend to get higher rates of interest when the base rate increases. Interest rates on savings and ISA accounts usually dwindle when the base rate falls.

To ensure that you’re preserving your spending power your money needs to be earning more than the current level of inflation which is 2.8%

Currently, the top easy access savings accounts are offering around 5% AER while the best Cash ISA’s are paying around 4.75%.

Use our best savings accounts and best Cash ISA round ups to help you compare the best accounts on the market at the moment.