Inflation, interest rates and you: Bank Rate, CPI, mortgages and savings

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🏦 What do these numbers mean for mortgage rates? ✕

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The 2% target

The Government sets the Bank of England a target of keeping inflation — measured by the CPI, the Consumer Prices Index — at 2%. The Bank's main lever is Bank Rate — the interest rate it pays on banks' deposits, which anchors what banks charge everyone else.

Inflation above 2% → rates tend to rise (or stay high)

When inflation runs above target, the Bank tends to raise Bank Rate, or hold it higher for longer. Dearer borrowing cools spending, which pulls inflation back down. When inflation falls back to (or below) target, the Bank tends to cut.

The knock-on effect on mortgages

Tracker mortgages follow Bank Rate directly — a change shows in your payment the following month. Standard variable rates (SVR) usually move within weeks, at the lender's discretion. Fixed-rate deals don't change until the deal ends — but new fixes are priced off market expectations of where Bank Rate is heading (swap rates), so they often move before the Bank does anything. The flip side: higher Bank Rate generally means better savings rates.

General information, not financial advice — mortgage pricing also depends on your deal, loan-to-value and lender competition. Sources: ONS CPI (D7G7), Bank of England.

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