Here are five key points regarding the Bank of England’s interest rates announcement:
- The Bank of England chose to keep interest rates unchanged at 3.75%. This decision follows a narrow 5-4 vote by the Monetary Policy Committee, in what is a “bombshell” freeze after many expected a cut. However, Governor Andrew Bailey suggested that further reductions remain likely later this year as inflation cools.
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For homeowners, the freeze means mortgage and loan costs will likely remain stable for now. While some lenders recently increased rates due to market uncertainty, experts suggest competition remains high. Borrowers on tracker or variable deals won’t see immediate relief, but those looking to remortgage may still find deals significantly better than 2023 peaks.
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Savers can view the hold as a welcome relief, as it prevents an immediate drop in returns. Despite many banks slashing rates recently, the freeze helps stabilise the market. Finance experts urge savers to move money quickly into competitive accounts, such as high-interest ISAs, before any potential rate cuts materialise during the next meeting in March.
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The Bank updated its forecast for inflation, now predicting it will hit the 2% target by this spring – much earlier than the previous 2027 estimate. While current inflation sits at 3.4%, lower energy bills expected in April are a primary factor driving this optimism, providing a more positive outlook for the UK’s cost-of-living crisis.
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Economists suggest the close vote has opened the door for a potential cut as early as March. With four committee members already pushing for a decrease to 3.5%, the focus shifts to upcoming employment and wage data. Brits should prepare for a “painstakingly cautious” path toward lower rates throughout the remainder of 2026.