How do interest rates affect me and when will they come down?

The Bank of England held interest rates at 5.25% in May, but cuts are expected later in the year. Interest rates affect mortgage, credit card and savings rates for millions of people across the UK. What are interest rates and why do they change? An interest rate tells you how much it costs to borrow money, or the reward for saving it. The Bank of England's base rate is what it charges other lenders to borrow money. This influences what other banks charge their customers for loans such as mortgages, and the interest they pay on savings.The Bank of England moves rates up and down in order to control UK inflation - the increase in the price of something over time. When inflation is high, the Bank - which has a target to keep inflation at 2%- may decide to raise rates. The idea is to encourage people to spend less, to help bring inflation down by reducing demand. Once this starts to happen, the Bank may hold rates, or cut them. When will UK interest rates go down? The Bank rate is currently at its highest level for 16 years.However, it was higher than this for much of the 1980s and 1990s, and was 17% in November 1979. There have been questions about why interest rates have not been cut, with inflation dropping sharply. Inflation was at 3.2% in March - down from a peak of 11.1% in October 2022. Further falls are expected. Following May's decision to keep interest rates at 5.25%, the Bank's governor Andrew Bailey said he was "optimistic that things are moving in the right direction". But he said the Bank needed to "see more evidence" that price rises had slowed further before cutting interest rates.It left open the possibility of an interest rate cut in June, after two sets of new figures for inflation and wages are published. However, a cut later in the summer is considered more likely. The Bank has to balance the need to slow price rises against the risk of damaging the economy - which has shown little sign of growth. Bank optimistic 'things moving in right direction' How do interest rates affect me? Mortgages Just under a third of households have a mortgage, according to the government's English Housing Survey.