How Bank of England interest rate decisions reach your wallet
When the Bank of England changes Bank Rate, the effects ripple out to mortgages, savings, investments and the pound. Here is how.
By Rainsbridge
1 min read
For information only. This is not financial advice or a personal recommendation.
The Bank of England's Monetary Policy Committee meets regularly to set Bank Rate, the interest rate that influences most other rates in the UK economy. Its main job is to keep inflation close to the government's 2% target.
Mortgages
Tracker and variable-rate mortgages usually move soon after a change in Bank Rate. Fixed-rate mortgages do not change until the fixed period ends, but the rates offered on new fixed deals tend to reflect where markets expect rates to go.
Savings
Banks often, though not always, pass on rate changes to savers. Higher rates can mean better returns on cash, while cuts usually mean lower ones.
Investments
Rate changes can affect bond prices (which generally move in the opposite direction to interest rates) and company share prices, because borrowing costs and the attractiveness of cash both change.
The pound
Higher interest rates can make a currency more attractive to overseas investors, which can affect the cost of holidays and imported goods.
Further reading
The Bank of England publishes each decision, with an explanation, on its Monetary Policy pages.
