Bank Rate is the interest rate the Bank of England pays to banks that hold money with it. Because it affects what banks earn and pay, it influences the rates they offer savers, but it isn’t the only thing that does, and savings rates don’t always move by the same amount as Bank Rate.
How Bank Rate reaches your savings
When the Bank of England raises Bank Rate, banks usually increase the interest they pay on savings, and when it cuts Bank Rate they usually cut savings rates. But other things affect savings rates too, so they can move by a different amount, or at a different time. Banks also normally pay savers less than they charge borrowers, so there’s usually a gap between savings and loan rates.
How a change reaches you depends on the account:
| Account | What happens when Bank Rate changes |
|---|---|
| Easy access | The rate is variable, so the bank can change it at any time, by any amount |
| Notice account | Variable, like easy access, but you have to give notice to leave if you don’t like the new rate |
| Fixed rate bond | Your rate doesn’t change until the term ends; only the rates on new bonds move |
| Variable rate cash ISA | Variable, like easy access |
| Regular saver | Some have a fixed rate for the term and some a variable one; check the account’s terms |
What happened over the last year
Bank Rate was cut from 4.25% to 4% on 7 August 2025 and to 3.75% on 18 December 2025, and it was 3.75% in August 2026. Average savings rates didn’t all follow:
| Average rate (Bank of England) | August 2025 | August 2026 |
|---|---|---|
| Instant access | 2.27% | 2.07% |
| 1-year fixed rate bond | 3.80% | 4.04% |
| 2-year fixed rate bond | 3.76% | 4.24% |
Instant access rates fell with Bank Rate, while the average 1-year fixed rate rose. A fixed rate is set for the whole term, so it can move quite differently from Bank Rate today. In September 2026 the Bank of England held Bank Rate and said that the longer energy price volatility lasts, the more likely it is that it will need to raise Bank Rate.
Inflation: the rate that matters
Interest only makes you better off if it’s more than inflation. CPI inflation was 3.1% in August 2026, against the Bank of England’s 2% target:
- at the average instant access rate of 2.07%, savings were losing about 1.03 percentage points a year of buying power;
- at the average 1-year fixed rate of 4.04%, they were gaining about 0.94 points, before tax.
This subtraction is a close approximation to the real return. Tax on interest above your Personal Savings Allowance reduces the real return further, which is one reason cash ISAs matter more when rates are high. For more on inflation itself, see how inflation affects your money.
What to do when rates change
- After any change, check your variable rates against the latest averages in how to find the best savings account, and switch if yours has fallen behind.
- Timing a fix is a guess. Nobody knows where rates will go next, so waiting for a better fixed rate may or may not pay off. If you have money you won’t need for a year or more, fixing part of it and keeping the rest in easy access, or laddering bonds of different terms, spreads the risk.
- Keep your emergency fund in easy access whatever rates do (emergency fund).
Related guides
- Savings accounts guide: the account types, average rates, tax and protection in one place
- Fixed rate bonds: rates by term, and fixed against easy access
- How to find the best savings account: the benchmark and checks for any account
- Money market funds: returns that track short-term interest rates