What the latest interest rates vote means for your mortgage, savings and bills

The Bank of England has held the base rate to 3.75 per cent, the lowest level in three years

The Bank of England (BoE) announced on Thursday its decision to hold interest rates at 3.75 per cent, following a fourth cut of 2025 in December.

For December’s vote, the bank’s nine-person Monetary Policy Committee (MPC) showed a split vote which was 5-4 in favour of the cut - but this time in January it swung the other way, 5-4 in favour of holding. Even that was closer than had been expected though, signalling more rate cuts may lie ahead.

Following falling inflation rates, poor economic figures and rising unemployment, the base rate remains at the lowest level in around three years.

Here’s a brief rundown of what the current interest rate might mean for you:

What does the interest rate mean for mortgages?

Broadly speaking, as increasing interest rates over the last few years have meant mortgage repayments going up, then the reverse also holds true: lower rates, lower repayments. However, there are several important things to note.

Firstly, that it’s only the interest on the repayments which should change – your capital repayments will naturally decrease the more you pay off your mortgage. Secondly, the bank rate (official term!) isn’t the rate you are necessarily charged by your bank or lender for the mortgage – they’ll base theirs off the BoE rate but it doesn’t have to be the same.

Almost two million households are expected to seek renewed deals in 2026 (AFP/Getty)

More than half a million people do, however, have a mortgage that tracks the BoE interest rate, and those would see an immediate change in the event of any rise or cut.

Far more people have fixed-term deals, which expire after perhaps two years, or often up to five, and need renegotiating – almost 2 million homeowners are expected to seek renewed deals in 2026.

If you’ve got a fixed term mortgage plan, you won’t see a change in repayments in any case until that comes to an end and you start a new one, but if you’ve already finished and moved onto a standard variable rate deal, then you might see a change in your repayments.

New mortgage products tend to be based on swap rates – market agreements based on future expectations of interest rate movements – rather than the current bank rate, which is why some lenders have raised their mortgage deals to make them more expensive in recent weeks.

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What about savings accounts?

If you have money in a savings account, it’s the other side of the see-saw: rates going down mean you’ll earn less interest.

As there has been a bit of a fierce battle raging among banks and building societies for customers, it’s still possible to get good deals if you are happy to lock in money for a fixed period of time or contribute regular amounts, with several offering more than 4 per cent still.

However, some have been removed from the market or have their rates altered already, while many of the best deals in easy access accounts have been below 4.5 per cent for a while now - Chase remains an exception.

Locking in your money for a certain amount of time means it’s possible to get good deals (AFP/Getty)

There are always terms and conditions to be met, so ensure any accounts you open suit your circumstances, but the opportunity still remains to save and earn money at a better rate than inflation, which currently sits around 3.4 per cent.

Do be aware of the amount of interest you can earn without being taxed, though. If your savings account interest rate isn’t fixed, banks can always change the rate you get up or down.

A tax-efficient way of saving is to use a Cash ISA, where everyone (for now!) has a £20,000 personal allowance each year, which will drop to £12,000 soon, with the other £8,000 reserved for tax-free investing.

Bills and repayments

Credit card repayments and other types of personal loans are, of course, also affected by interest rates, as the amount they all charge for borrowing could be altered.

For credit card users (and especially for buy now, pay later deals), it’s always important to pay off the full amount each month if you are able to, to avoid interest being charged at all – depending on your circumstances and the account type, they can be one of the more costly ways to borrow.

Again, it may not be immediate that lenders alter their rates after a base rate change, but get in touch with them to assess your options if you feel your repayments could or should be lower.