Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.
Expectations for interest rates have risen following the outbreak of conflict in the Middle East.
Prior to the action taken by Israel and the United States last week, the UK bond market was pricing in a near-certain cut to the Bank of England rate in March - taking the rate from 3.75% to 3.5% - and then at least another quarter-point cut before the end of 2026.
Now markets see a cut coming only around June, with a further cut this year in the balance. Potential disruption to global energy and supply chains is seen as an inflationary risk, making it harder for the Bank to cut rates.
Official UK interest rates lie at 3.75% after the Bank’s Monetary Policy Committee (MPC) had voted 5-4 to hold rates in February. Data since then has generally added to the case for a cut. On 17 February labour market figures showed unemployment at 5.2% in the three months to December, the highest since the pandemic. Regular wage growth slowed to 4.2%. The relative strength of wage rises, and the potential for this to maintain demand and therefore inflation, has been an obstacle to the Bank lowering rates sooner.
Then on 18 February, official Consumer Price Index (CPI) inflation for January came in at 3%, sharply down from 3,4% in December. The conflict in the Middle East now threatens to add upward inflationary pressure.
Markets are now pricing in slightly faster rate cuts this year, and then potential rate rises next year.
The next central bank meeting is scheduled for 19 March 2026 followed by meetings on:
- 30 April 2026
- 18 June 2026
- 30 July 2026
How rates have changed
The path ahead for interest rates, as implied by market prices, has been changing. The chart below shows the implied level of interest rates from 2 March 2026, 16 February 2026 and 3 February 2026. This is based on market prices for government bonds with different lengths of maturity.
The most recent reading (in blue) shows that markets now see falls to 3.5% as likely in the coming months but only a 50/50 likelihood of another cut in 2026.
Will mortgage rates fall?
As a general rule, if the Bank of England lowers interest rates then mortgage rates tend to fall as well. Ultimately, however, it is up to lenders to decide the rates they offer and changes to mortgage deals can often run ahead or behind changes in the Bank rate.
Mortgage rates have fallen from a peak in 2023. As of 3 March 2026, the best rate on a five-year fixed rate mortgage was 3.75%1. Further falls in the Bank of England rate is likely to be reflected in the mortgage market as well.
Will cash savings rates fall?
The rates you see on cash savings are set by account providers who compete with each other to win savers’ deposits. While not directly linked to movements in the Bank of England rate, they do tend to correlate with it. The predicted falls in the Bank Rate are, therefore, likely to be accompanied by falling savings rates as well.
The rates on best-buy cash accounts have been declining since last summer. This has pushed headline rates lower but has also encouraged savings providers to add in conditions which potentially reduce the rate you get. Many of the highest-paying accounts include an element of interest which is temporary and will fall out after six months or a year. Alternatively, you may lose several months interest if you withdraw money from the account.
Currently, the highest interest is being paid on Cash ISA accounts. As of 3 March 2026, the best rate on a Cash ISA which allows easy access to your money is 4.5%2.
Cash options - the best ways to save
There are a number of potential homes for money if you decide to hold it in cash.
It makes sense to shield your cash returns from tax if you can, which means using part of your £20,000 annual ISA allowance to hold cash. Cash ISAs do this job - although any allowance you use for cash cannot then be used for investments.
Non-ISA cash accounts also exist but returns are potentially subject to tax at your rate of income tax, subject to certain allowances.
For this reason, some savers choose Premium Bonds, where there is no guaranteed rate of interest but monthly prizes are paid instead. Prizes are tax-free but the rates of return on Premium Bonds have also been falling. Moreover, you have to have above average luck in order to get those rates.
An increasingly popular cash option is to move cash savings to an investment account but utilise assets which produce a cash-like return while rates remain somewhat attractive. That would allow you to take advantage of above-inflation returns from cash while it lasts, but also leave you ready to switch to investments if and when that suits you.
Cash funds or money market funds held inside investment accounts can do this job. The Fidelity Cash Fund is the best-selling cash fund on the Fidelity Investing platform and is forecast to produce 4.46% of income in the coming year - or 4.11% after deducting the Fidelity platform charge of 0.35%. Please note this yield could go down or up and is not guaranteed.
- Read more about the Fidelity Cash Fund
Fidelity: current interest rates we pay on cash
Here are the current interest rates we pay on cash held in our accounts. This includes our -
- Stocks and Shares ISA (including Junior ISA)
- Investment Account
- Cash Management Account
- Self-Invested Personal Pension (SIPP) (including Junior SIPP)
Please note that interest rates can be changed at any time and the rates below have been applied since 1 January 2026.
| Account | Gross rate of annual interest | Annual Equivalent Rate (AER) |
|---|---|---|
| ISA (including Junior ISA) | 2.20% | 2.22% |
| Investment Account | 2.20% | 2.22% |
| Cash Management Account | 2.20% | 2.22% |
| SIPP (including Junior SIPP) | 2.20% | 2.22% |
Source:
1 London & Country, 4 March 2026
2 MoneySavingsExpert 4 March 2026
Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. An investment in a money market fund is different from an investment in deposits, as the principal invested in a money market fund is capable of fluctuation. Fidelity's money market funds do not rely on external support for guaranteeing the liquidity of the money market funds or stabilising the NAV per unit or share. An investment in a money market fund is not guaranteed. The value of shares may be adversely affected by insolvency or other financial difficulties affecting any institution in which the Fund's cash has been deposited. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.
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