It is important to have a clear understanding of the Bank of England interest rate because it affects how much it costs you to borrow money and how much you earn on your savings. Borrowing becomes cheaper when the rate goes down and dearer when rates go up. This does not mean everyone will see a change in the interest rate on their mortgage, credit card or savings account when the Bank of England changes its rate, as rate changes affect different products in different ways.

However, interest rates are a commercial decision for firms so changes are not always passed on straight away and some rates offered will be more competitive than others. If you are mortgage customer, how changes affect you depends on the type of mortgage you have:


Fixed rate: Your monthly mortgage payments should not change. However, any change may affect you if you are coming to the end of your fixed-rate period or looking for a new deal.

Standard variable rate: It is up to your lender when your monthly mortgage payments go up and down so you may not see a change.

Tracker mortgages: If it tracks the Bank Rate your monthly payments will go up or down by the same amount as the interest rate change. However, some tracker mortgages have a minimum interest rate so a reduction may not always affect you. Some trackers track rates other than the Bank Rate. So your monthly payments will change in line with that rate, and not the Bank Rate. If you have a different type of mortgage or want to find out more speak to your lender.


If you are a savings account customer, how changes affect you depends on the type of account you have:

Fixed rate: The change shouldn’t affect you until the fixed-rate period of your deal runs out.

Variable rate: You are likely to see the interest rate on your account go up or down, so you can earn more or less on your savings.

But for all savers, the actual amount interest rates increase or decrease by may not be as much as the Bank Rate. Competition will also mean some rates are better than other.

For Overdrafts and credit cards, you may see the interest rate change accordingly. With regard to personal loans and other fixed-rate agreements, the existing customers should not see a change in the interest rate.