Interest rates UK: Bank of England move today could make a mortgage more costly - what it means for your money

• Bank of England holds interest rates at 4.25% amid economic uncertainty
• Inflation has eased but remains above the 2% target at 3.4%
• Rising global energy prices risk pushing household bills higher again
• Mortgage, loan and credit card costs stay high for now
• A rate cut could come as soon as August if the economy continues to slow

The Bank of England has kept interest rates steady at 4.25%, despite growing pressure to lower them.

With the cost of living still high and signs the UK economy is weakening, many households are wondering: when will borrowing get cheaper – and will you end up with more or less money in your pocket?

The Bank of England uses interest rates to control inflation – the rate at which prices rise. When inflation is high, they raise rates to encourage saving and make borrowing more expensive, which should slow spending.

When the economy is struggling or inflation falls, they cut rates to stimulate growth. At 3.4%, inflation is still above the Bank’s 2% target, but it's come down a lot from its double-digit peak in 2022.

That’s why many expected a cut soon – especially with signs that the jobs market is cooling, such as slower wage growth and rising unemployment.

But for now, the Bank has decided to hold. Six members of the Monetary Policy Committee voted to keep rates on pause, while three wanted to cut. It shows there’s growing division – and that rate cuts may not be far off.

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What does it mean for your finances?

Mortgages and rent

If you have a variable or tracker mortgage, your monthly repayments won’t fall just yet. People coming off fixed-rate deals will still face higher costs than a few years ago, though they might find slightly better deals than last year.

For renters, it’s a mixed picture. Many landlords face higher mortgage costs, which can lead to rent hikes. A cut in interest rates could ease this pressure – but that relief is not here yet.

Loans, credit cards and debt

Interest rates influence how much you pay to borrow. With the Bank rate still at 4.25%, borrowing remains expensive. Whether you’re using a credit card, car finance, or a personal loan, repayments stay higher for now.

Wages and jobs

The Bank pointed to a “softening” jobs market – meaning employers are hiring less, pay rises are slowing, and unemployment is starting to rise. That could mean fewer opportunities or smaller pay packets in the months ahead.

Prices in the shops

Energy prices are rising again globally due to conflict in the Middle East and oil market instability. That could push up household bills later this year, especially if it feeds into wider price increases, like we saw in 2022.

But weaker demand at home – and businesses cutting costs – may help balance that out. Many firms are trying to avoid price hikes by trimming staff hours, reducing salaries, or accepting lower profits.

Will interest rates eventually fall?

The Bank hasn’t ruled out a cut at its next meeting in August, especially if inflation continues to fall and the economy keeps slowing. In fact, three members already voted for a cut this time – a clear signal that change is on the horizon.

Experts believe we may see one or two cuts before the end of the year – with some predicting rates could drop in both August and November.

But uncertainty overseas – such as oil price shocks, war in the Middle East, and the second Trump presidency affecting global trade – could delay the timeline.

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