Interest rates held at 4.75% by Bank of England - what it means for your money
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Interest rates have been held by the Bank of England at 4.75% after inflation rose for the second month in a row. The base rate has come down in recent months from its high of 5.25% - but news of no further cuts this year will be a blow to millions of mortgage borrowers who have seen their costs rocket over the last two years, as well as those who need to remortgage next year. Six members of the Monetary Policy Committee (MPC) - who are responsible for making decisions about interest rates - voted to keep the base rate at 4.75%, while three wanted to cut it to 4.5%.
It comes after the Bank of England cut interest rates twice this year - the first reduction happened in August, then the second cut was in November. Governor Andrew Bailey warned the central bank needs to make sure inflation returns to its 2% target on a "sustained basis" and said further cuts will be gradual.
He said: "We think a gradual approach to future interest rate cuts remains right, but with the heightened uncertainty in the economy we can’t commit to when or by how much we will cut rates in the coming year." The base rate is what the Bank of England charges other banks and lenders to borrow money - this then influences how much you're charged on mortgages, loans and other types of credit.
The base rate is also used by the Bank of England as its main tool to lower inflation - as when the cost of borrowing is higher, people have less money to spend, and this brings down demand and prices. Interest rates stood at an historic low of 0.1% in December 2021 but were steadily increased to combat inflation, which hit a high of 11.1% in October 2022.
