Bank of England holds interest rates at 3.75%: What it means for your mortgage and savings
The Bank of England opted to hold interest rates at 3.75 per cent today, with traders now betting on rate rises later this year.
The bank has cut rates gradually from a high of 5.25 per cent since August 2024. It follows last month's decision to hold rates, with the next decision scheduled for 30 April.
Policy makers are now worrying about the inflationary threat posed by soaring oil and gas prices, as a result of the conflict in the Middle East.
Traders no longer expect any interest rate cuts in 2026, with a growing possibility that the central bank will need to raise them later this year.
Increasing interest rates is one way to reduce inflation, as it makes people less likely to spend or borrow money and more likely to save.
Consumer Price Index inflation was 3 per cent in the year to January, according to the latest figures from the Office For National Statistics.
Hold fire: Cutting interest rates could risk adding fuel to what may prove to be a fresh inflationary spike as a result of the conflict in the Middle East
This was expected to fall to the central bank's target of 2 per cent by the end of this year, according to forecasts - but now the Office for Budget Responsibility is warning that inflation could remain around 3 per cent or even go higher.
Meanwhile, the UK economy flatlined in the three months to December 2025. Services showed no growth, production fell by 0.1 per cent, and construction grew by 0.2 per cent in January.
Today's decision to hold rates will seem like bad news for households hoping to see the cost of their mortgage reduce, but may be received positively by savers, as interest on their accounts usually falls if the base rate goes down.
We explain what the Bank of England's decision to hold rates at 3.75 per cent means for your mortgage and savings.
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What does this mean for mortgage borrowers?
Banks and building societies are continuing to reprice mortgage deals higher amid the market fallout from the conflict in the Middle East.
Lenders including Halifax, Santander, Barclays, HSBC and Nationwide Building Society have all announced rate increases in recent days.
The lowest fixed rates, which went below 3.5 per cent only as recently as January, are now back above 4 per cent.
Lenders usually base their mortgage rates on predictions for the longer-term trajectory of interest rates, rather than reacting to individual base rate decisions.
However, the change to households' monthly payments won't be as large as many often expect.
For example, a £200,000 mortgage being repaid over 25 years, rates moving from 3.75 per cent rate to a 4.25 per cent is the difference between paying £1,029 a month and £1,083 a month - £648 more over the course of one year.
Chris Sykes, mortgage broker at MSP Financial Solutions, says: 'It isn’t a return to the Liz Truss budget era, it is merely a reversal to the rates we were seeing 12 months ago; in fact I’m often quoting clients who secured a two year fixed rate deal two years ago better rates than they are currently on.
'The market has widely predicted that this base rate decision would be a wait and see hold, so this will not rock the market.'
For those on variable rate deals there isn't likely to be any changes. This includes those on a tracker mortgage which tracks the Bank of England base rate or those on a standard variable rate, the rate that people drop onto when their deal lapses and they fail to or are unable to remortgage.
Tracker mortgage rates are now the cheapest on the market; the first time they have gone below the cheapest fixed rates since October 2023.
The lowest two-year tracker deal is currently offered by Nationwide at 3.94 per cent and a £999 fee. That's base rate plus 0.19 per cent.
On a £200,000 mortgage being repaid over 25 years that would equate to paying £1,049 a month.
Chris Sykes, mortgage broker at MSP Financial Solutions says rates are still lower than they were two years ago
What next for mortgage rates?
Fixed rate mortgage pricing is largely based on Sonia swap rates - the inter-bank lending rate, which is based on future interest rate expectations.
When Sonia swaps rise sufficiently it often results in fixed mortgage rates going up, and vice versa when they fall.
Similar to gilt yields, Sonia swap rates have spiked upwards since the conflict began. Two-year swaps were 4.03 per cent today, up from 3.36 per cent on 27 February.
Meanwhile, five-year swaps were at 4.06 per cent, up from 3.41 per cent on 27 February.
Mortgage rates may continue to rise, rather than fall over the coming weeks, but much of the change in swaps has now filtered through into fixed rate mortgage pricing.
David Hollingworth, associate director at L&C Mortgages, says: 'Until there is more clarity around how long the conflict may last and whether oil prices could ease back there is likely to be ongoing volatility.
'Lenders are also attempting to manage [customer] volumes as they see big influxes of business, as borrowers rush to grab rates before they disappear.'
What should mortgaged households do?
For those due to remortgage this year, the first thing to do is to make sure they’re moving to the best deal available. This means speaking to their broker or their lender and locking in a new rate as soon as possible.
It is possible to reserve a new mortgage rate as early as six months before your current one ends.
Lock in now: David Hollingworth, associate director of L&C Mortgages says that securing a rate ahead of your deal ending will protect you against further increases
Someone with a mortgage deal ending in September or before should try to lock in a rate now. If the situation changes and rates begin to fall again, it is usually possible to abandon it in favour of a new one until just before the new mortgage begins.
'Anyone considering their mortgage options will unfortunately be under pressure to make a quick decision or risk having to accept a higher rate,' added Hollingworth.
'We’re still seeing rate hikes come through and deals are being withdrawn with limited notice.
'Therefore, borrowers that have an attractive rate in front of them are having to act fast in making an application to secure the rate.
'Securing a deal will protect against further rate rises but if rates do ease back in time, there’s still a chance to review before completion and move to a lower rate at that time.'
What does this mean for your savings?
The base rate affects how much interest savers can earn on their money. In general, savings rates rise when the base rate is rising, and fall when it is falling.
Now that the base rate has been held at 3.75 per cent, savers should expect savings rates to fall less quickly than they had been.
Savings rates have been on a downward trend since the base rate started coming down. Interest rate cuts reduce the amount banks earn on their own cash reserves, and this is passed on to customers.
More than two thirds of savings providers have cut rates since the start of 2026, so expect savings rates to settle at a lower level.
You can find the best easy-access savings rates using This is Money's table, which is updated daily.
Andrew Hagger, founder of independent information website MoneyComms says: ‘This is good news for savers who are already benefiting from better deals as swap rates continue to rise.’
He says: ‘It’s certain to be held in April again. But beyond that, it’s incredibly hard to call now and entirely depends on how prolonged the Iran war is.
'Markets still expect a 3.25 per cent base rate by the end of 2026 and, if that’s where we are heading, fixed rates significantly north of 4 per cent don’t look justified,’ Blower adds.
What should savers do now?
Savers should keep a close eye on their savings, whether they are stashed in an easy-access account, fixed-rate account or an Isa as rates are expected to fall across the board.
If your money is earning interest at a rate of less than the rate of consumer price inflation, 3 per cent, you should consider moving it to an account paying a better rate.
Andrew Hagger says: 'Even though the base rate hasn't changed, I'd urge savers to check with their bank for the latest rate on their nest egg as it may be earning far less than they thought.
'If your cash is stagnating in a sub 2 per cent rate with your high street bank, it's time to ditch it and switch to a better deal.
'Take a look at a straightforward best buy deal and double your savings income with the likes of such as Spring Easy Saver at 4.11 per cent or Charter Savings Bank at 4.06 per cent.
James Blower of the Savings Guru: Base rate will continue to be held in April as the war in the Middle East pushes up inflation
'Neither of these accounts restricts your withdrawals or inflates the rate with a short term bonus.'
Savers should strongly consider using a cash Isa to protect the interest they earn from being taxed.
Isa accounts are an area of the savings market where rates are rising as providers battle it out for customers in the run up to the end of the tax year.
James Blower says: 'The exception to rates being overpriced could be Isas where we may see some activity in late March and early April as providers seek to entice Isa savers for the last year of £20,000 allowance for all.'
The annual tax-free allowance will be cut to £12,000 from April 2027, apart from for over-65s, under plans announced at the November Budget.
Fixed-rate deals have held up surprisingly well and the rates have risen since the base rate was held at 3.75 per cent last month.
Best savings rates and how to find them
The best easy-access savings accounts with no restrictions pay 4.22 per cent.
Cynergy Bank has an easy-access deal paying 4.22 per cent. Someone putting £10,000 in this account could expect to earn around £422 in interest after a year, if the rate remained the same. There is a 2 per cent bonus rate on this account for 12 months and the rate will drop to 2.22 per cent after this.
Those with cash they won't immediately need over the next year or two should consider fixed-rate savings.
The best one-year deal is offered by DF Capital and pays 4.35 per cent. A saver putting £10,000 in this account will earn a guaranteed £435 interest over one year. It comes with full protection under the Financial Services Compensation Scheme up to £120,000 per person.
Union Bank of India is also offering 4.35 per cent, while Tandem Bank and Close Brothers Savings are paying 4.31 per cent. All offer FSCS protection.
The best two-year bond pays 4.3 per cent and comes from Chetwood Bank.
For those who wish to lock their savings away for longer, Chetwood Bank also offers the best three-year bond and five year bond paying 4.4 per cent.
Our pick of the best cash Isas are featured below and you can check our cash Isa savings tables for all the top deals.
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