What’s going to happen to interest rates? And what it means for mortgages, savings & more!

Adrian Chiles (0:01)

We've got quite a big cheese.

SPEAKER_2 (0:02)

I mean, yeah, a full fromage.

SPEAKER_3 (0:04)

A full fromage.

Martin Lewis (0:05)

Will they change? When will they change? How much will they change? It matters today.

Jack (0:10)

I'll try not to be too cheesy.

Adrian Chiles (0:11)

Don't worry, Martin, I'll look after the cheese.

Martin Lewis (0:13)

If you increase the mortgage term, you're spreading the length of the debt, and spreading the length of the debt means you pay more interest. Hello, I'm Martin Lewis, and this is the cunningly named The Martin Lewis Podcast.

SPEAKER_2 (0:25)

I didn't wonder what that's gonna be about.

Martin Lewis (0:27)

And this is our Big Topics episode Each week we lead on one main subject to help you save. Usually most of it comes from my BBC Radio 5 live show with Adrian Chiles, but there's also bonus money saving tips and tricks just for you lucky lucky podcast listeners.

In today's episode, it's a big one. What's gonna happen to interest rates over the next year? The mood music is they're going up, but how much by how certain is it and when will they go up? And then how do you take that information and use it to make best decisions about your savings, loans, credit cards and mortgages? I'm joined by an economist, I'm joined by a mortgage broker. We're gonna delve into it and make sure that you are tooled up with everything you need to know to get you through the next year. Then the Tell Us is all about what's the most expensive thing you've bought and never used, whether it's you were blown away by a Dyson hair dryer or sank in your own hot tub. And this week's Mastermind, or I admit, I think I may have chumped a shark in the intro to it, I got a little bit carried away with my lesbian side, but it's good anyway. It's a question on savings.

Play the theme tune.

Adrian Chiles (1:42)

OK, so we normally touch on interest rates when there's an announcement of them changing. So but which…

SPEAKER_3 (1:48)

It was last week.

Adrian Chiles (1:50)

We had one last week. But why now then?

Martin Lewis (1:52)

Because what I wanted was a sort of calm consideration of where we're going. The important thing to understand about interest rates. So when we're talking interest rates, let's take it back to basics. We are talking the Bank of England UK base rate. That sets the standard interest rate for the UK.

But the fact it hasn't moved last week is probably less interesting than the fact that the vote was six to three. So of the nine members of the Monetary Policy Committee who meet every six weeks or so to decide what's going to happen to UK interest rates, six of them voted to keep it on hold. Three of them voted to increase it from its current 3.75% level where it's been since December 2025

Now, what's important about people's predictions of where interest rates are going? Now, that was a signal that we have the mood music is upwards. And we're going to be talking to a proper economist to discuss that in more detail in a moment. But what I wanted to just make sure everybody understands is predictions about future interest rates are not just a crystal ball issue.

They materially affect what happens today. What the markets think will happen in future affects the prices of products that you can get today in very simple terms. So the main area has a difference is if you are a bank or a building society and you are launching a fix, whether that be a mortgage or a savings products, you're trying to price it effectively at the interest rates over the period which the fix lasts for. And that's done by looking at what the swap markets are and where they can buy different types of instruments to do so. So the fact that the mood music indicates that interest rates in the UK are likely to go up over the next year, has a tendency to push the rate at which you can get a fix at up, both on mortgages and on savings, and personal loans are fixed too and credit cards. We'll go into the minutiae of how it varies in each one of those later. But that's the big picture. Why this isn't just a sort of naval gaving, oh, what's going to happen to interest rates with the go up or down? It matters today.

Adrian Chiles (4:02)

Okay, we've got a guest here and you've got quite a big cheese.

Martin Lewis (4:07)