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.
The Bank of England kept rates on hold at 3.75% in April despite a rise in inflation triggered by the conflict in the Middle East.
Expectations for interest rates have been buffeted by the conflict which has threatened to spike energy costs and send inflation and rates higher. The first evidence of that arrived in inflation data for the UK (22 April) which showed the headline rate of Consumer Price Index (CPI) inflation rising from 3% to 3.3%.
Despite that, the Bank kept rates on hold at its April rate-setting meeting. This may be the calm before the storm, however. Ahead of the decision the bond market was pricing in as many as three quarter-point rises over the next year. The first of those is possible at the next MPC meeting in June. Were all those rises to happen it would place a hard brake on an economy that is forecast to grow only slightly this year.
It’s not certain, however, that we will see those rises. The Bank will be reluctant to raise rates in the face of already slowing growth and will know that higher energy prices can have a deflationary effect on the economy without the need for rate rises on top. Rate-setters will be wary of inflation widening out, as happened following the invasion of Ukraine. Unlike then, however, wage rises and employment are now weakening, raising the chances the Bank will look through a spike in headline inflation.
The Bank’s Monetary Policy Committee (MPC) voted 8-1 to hold rates in April. It warned that these ‘second round’ effects were more likely the longer the energy crisis continued.
Beyond the Middle East conflict, UK economic data has been generally supportive of interest rates falling. Unemployment dipped slightly to 4.9% in the three months to February but remains above its level from a year ago, while wage growth slowed in the same period to 3.6% for regular earnings (excluding bonuses) and 3.8% for total earnings (including bonuses). This extra ‘slack’ in the labour market makes it arguably less likely that high energy prices will translate into higher ingrained inflation.
The next central bank meeting is scheduled for 18 June 2026 followed by meetings on:
- 30 July 2026
- 17 September 2026
- 5 November 2026
How rates have changed
The path ahead for interest rates, as implied by market prices, has changing significantly following the outbreak of the conflict in the Middle East.
The chart below shows the implied level of interest rates from 16 February, 19 March and 28 April 2026. This is based on market prices for government bonds with different lengths of maturity.
You can see how the path for rates on 16 February - prior to the outbreak of fighting - was downwards. At the height of uncertainty on 19 March, before any negotiations for a ceasefire, expectations had jumped and rates were forecast to hit 4.5% - three quarter-points higher than their current levels.
The reading for 28 April, following the commencement of negotiations, shows that expectations have moderated but only slightly, with one rise to 4% now expected in the coming months with another two likely to follow over the next year.
Where next for mortgage rates?
As a general rule, if the Bank of England moves interest rates then mortgage rates tend to follow. 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 jumped in line with the rising expectations for rates in the coming year. As recently as 3 March 2026, the best rate on a five-year fixed rate mortgage was 3.75% but this has now climbed to 4.74%1. Reports from the mortgage market suggest that many of the best deals have been pulled from sale.
Where next for savings rates?
As a general rule, if the Bank of England moves interest rates then mortgage rates tend to follow. 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 jumped in line with the rising expectations for rates in the coming year. As recently as 3 March 2026, the best rate on a five-year fixed rate mortgage was 3.75% but this has now climbed to 4.61%1. Reports from the mortgage market suggest that many of the best deals have been pulled from sale.
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.
- 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 April 2026.
| Account | Gross rate of annual interest | Annual Equivalent Rate (AER) |
|---|---|---|
| ISA (including Junior ISA) | 2.25% | 2.27% |
| Investment Account | 2.25% | 2.27% |
| Cash Management Account | 2.25% | 2.27% |
| SIPP (including Junior SIPP) | 2.25% | 2.27% |
Source:
1 London & Country, 29 April 2026
2 MoneySavingsExpert 28 April 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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