Bank of England holds the base rate – but it’s closer than expected

The Bank of England has voted by a majority of 5–4 to maintain the Base Rate at 3.75%.

The Base Rate is important because it shapes how much interest you can earn on savings (if you’re saving money) and how much you pay on loans (if you’re borrowing money). It can affects everything from mortgages, to credit cards, and the everyday costs householders and business owners face.

In today’s vote, four members of the Monetary Policy Committee at the Bank of England voted to reduce the base rate by 0.25 percentage points, to 3.5%.

A lot closer than expected – and why that matters

The vote to hold the Base Rate was a lot closer than many experts and the financial markets had been predicting. Inflation is still above the Bank’s target of 2% so a strong vote to hold the Base Rate was widely expected. The fact that the vote was so close, means that a cut to the Base Rate could be coming sooner than was being anticipated.

That would be good news for borrowers, but for savers it means it’s extra important that you’re keeping an eye on the interest rates your bank or building society is paying to look after your spare cash. Banks and building societies often lower savings rates in anticipation of future cuts, so it’s important to keep a close eye on what your cash is earning — and be ready to switch if it falls behind.

Remember, your savings need to at least match inflation if you don’t want their real-world value to shrink.

Our Best Cash Savings and Best Cash ISA pages have all the top rates.

And don’t forget, ISAs protect your interest from tax, making them a smart home for spare cash if you haven’t already used up your £20,000 annual allowance elsewhere.