Bank of England holds interest rates at 3.75% as oil prices rise and global tensions grow

The Bank of England has held interest rates at 3.75% today, as the economic shock from the conflict in the Middle East continues to push up energy prices and unsettle global markets.

The decision was announced today at 12:00. The committee voted unanimously to hold the rate at 3.75% at this meeting. All committee members cited the conflict in Iran and the uncertainty around inflation in the next few months as a core reason for why they voted the way they did. Some said they had planned to vote for a cut prior to the beginning of the conflict.

Why the Bank held rates today

A cut had been widely expected earlier this year, as inflation eased and the UK economy showed signs of stabilising. But, geopolitical tensions mean the BoE was concerned about an increase in inflation as the conflict escalates.

Oil prices have also jumped because of disruption in the Strait of Hormuz, a key shipping lane. This puts upward pressure on inflation, which had been expected to fall closer to the Bank’s 2% target later in the spring.

Members of the MPC also pointed to the degree of uncertainty around the scale and the duration of the conflict, and subsequently, its ultimate impact on inflation.

With inflation currently at 3%, and risks now pointing upward rather than downward, the MPC chose to keep the rate unchanged while it assesses how long the price shock may last. Inflation is now expected to be around 3.5% in March, around half a point higher than what was expected in the February report.

The Bank of England's target inflation rate is 2%, but it now seems less likely this will be achieved by the end of the year, which had been widely predicted last month.

What this means for you

Here's what today's news mean for you.

Mortgages

Mortgage rates have been going up since the conflict first began. Fixed rated mortgage rates are higher now than they were a month ago when the Bank of England decided to hold interest rates. The expectation was that cuts would follow, but following the uncertainty and geopolitical tensions of the last few weeks, lenders have adjusted deals accordingly.

• Tracker or variable‑rate deals: If you're on a tracker mortgage, it'll stay the same for now as these types of mortgages follow the Bank of England's base rate. Those on variable deals may see shifts if their lenders' costs change.

• Fixed‑rate mortgages: If you’re already on a fixed rate, nothing changes for the time being.
  New fixed‑rate deals may still move slightly in the coming days, though many have already been increasing rates as lenders react to market moves as well as the BoE's decision.

Savings

Savings rates, especially for fixed rate bonds, have seen marginal increases in the last few weeks, though instant access products remain steady. On the whole, banks have already been trimming the best‑buy accounts in recent months, and today’s rate hold may slow, but not stop, that trend.

Loans and credit cards

Borrowing costs will likely remain as they are for the time being. This isn't great news for those relying on credit cards and loans, but it's unlikely we'll see a fall in interest rates until the situation stabilises.