The Monetary Policy Committee (MPC) at the Bank of England (BoE) has voted to hold the base rate at its current level of 3.75%. The members of the committee voted 5-4 to keep the base rate the same, with the four dissenting members voting for a 0.25 point cut. The hold comes against a backdrop of sticky inflation, which rose by more than expected to 3.4% for the 12 months to December 2025 on the back of higher tobacco duties, more expensive airfares over the Christmas season, and higher food prices.
While the decision to hold the base rate is not itself a surprise, most economists had predicted a 7-2 split, meaning two policymakers went against expectations to vote for a cut.
George Brown, senior economist at Schroders, said: "Today’s rate decision was seen as a foregone conclusion, but the Bank’s close vote to hold rates suggests cuts are not a matter of if, but when.
"The Bank’s guidance had been cautious and non‑committal, reflecting unease about the persistence of underlying inflation. That had left Governor Bailey holding the deciding vote - an unusually fine balance that underlines just how delicate this stage of the rate cycle has become. But his messaging suggests there should be further easing, with [Catherine] Mann also now leaning towards easing rates. The temporary disinflationary window ahead should offer enough cover to justify one or two more cuts."
The Bank has also updated its outlook for economic growth. It now expects the economy to grow by just 0.9% in 2026, down from it previous prediction of 1.2%, and 1.5% in 2027, down from 1.6%.
What is the Bank of England base rate?
The Bank of England base rate determines how much the BoE pays commercial banks for holding money with it. This then influences how much those banks charge customers to borrow money or pay customers who deposit savings with them. If the base rate goes down, it usually triggers a drop in the interest rate that banks and other lenders charge the public to take out loans, mortgages and credit cards, as well as the interest rate they pay out on savings. A base rate hike will usually mean interest rates are increased, and when the base rate is held, providers may still change rates, depending on the future economic outlook.
Why has the Bank of England held the base rate?
Changing the base rate is the Bank of England's way of controlling inflation and influencing UK economic growth.
The Bank of England's decision to keep the base rate at 3.75% signals that the MPC is exercising some caution due to the rise in CPI for December 2025, though it expects inflation to drop to its 2% target in the second quarter of 2026. The rising cost of food will be of particular concern, as this affects a huge number of consumers.
Although wage growth is still keeping pace with inflation, it cooled to its slowest rate in five years, 3.6%, in the three months to November 2025. However, the lack of a base rate cut will likely exacerbate household costs as lenders have already adjusted interest rates upwards in anticipation of today's decision from the Bank.
December's base rate cut came after a very close vote of 5-4. It was the fourth base rate cut of 2025, fulfilling predictions from the start of last year that the BoE would cut the base rate four times.
The US Federal Reserve chose to pause its recent interest rate cuts last week, meaning the US rate stays at a range of 3.5% to 3.75%. At its meeting today, the European Central Bank (ECB) is expected to hold the current deposit facility rate at 2.00% for the fifth consecutive time. Inflation in Europe is 1.7%, close to the target level of 2%, and is unlikely to change over the forthcoming months, but uncertainty around tariff deals should be enough to convince the ECB to hold.
Where will interest rates go in 2026?
The expectation from the Bank is that lower energy bills and only marginal economic growth will bring inflation down to its 2% target in the second quarter of 2026, creating the conditions for a base rate cut. It will also be buoyed by annual private-sector wage growth cooling to its slowest rate in five years, at 3.6% in the three months to November. In fact, the swaps market has priced in a quarter-point cut before June, most likely in April, and another by the end of 2026.
There is a chance that the economic outlook could change. For example, energy bills may not stick to the expected downward trajectory, as we have reported. A further increase to inflation, or even a fall that does not meet forecasts, would likely curtail the chances of a Spring rate cut.
The overall expectation, however, is that rates will fall this year as inflation and wage growth reduce. The Bank statement announcing the hold notably said: "On the basis of the current evidence, Bank Rate is likely to be reduced further. Judgements around further policy easing will become a closer call."
If you are interested in learning more about where interest rates might go in the future, check out our article on the latest UK interest rate predictions.
How has the BoE base rate changed over time?
The graph below shows how the Bank of England base rate has dramatically dipped and soared over time, either side of long periods of stability.
(Source: Bank of England)
Base Rate changes and how they impact you: December 2021 - February 2026
The table below shows the impact of the base rate decisions by the Bank of England since December 2021 on a £100,000 mortgage borrowed over 25 years:
| Date | Interest rate change | Previous interest rate | New interest rate | Change to average monthly mortgage repayments per £100k borrowed* |
| 16th December 2021 | +0.15% | 0.10% | 0.25% | +£8 |
| 2nd February 2022 | +0.25% | 0.25% | 0.50% | +£13 |
| 17th March 2022 | +0.25% | 0.50% | 0.75% | +£13 |
| 5th May 2022 | +0.25% | 0.75% | 1.00% | +£13 |
| 16th June 2022 | +0.25% | 1.00% | 1.25% | +£13 |
| 4th August 2022 | +0.50% | 1.25% | 1.75% | +£26 |
| 22nd September 2022 | +0.50% | 1.75% | 2.25% | +£26 |
| 2nd November 2022 | +0.75% | 2.25% | 3.00% | +£39 |
| 15th December 2022 | +0.50% | 3.00% | 3.50% | +£26 |
| 2nd February 2023 | +0.50% | 3.50% | 4.00% | +£26 |
| 23rd March 2023 | +0.25% | 4.00% | 4.25% | +£13 |
| 11th May 2023 | +0.25% | 4.25% | 4.50% | +£13 |
| 22nd June 2023 | +0.50% | 4.50% | 5.00% | +£26 |
| 3rd August 2023 | +0.25% | 5.00% | 5.25% | +£13 |
| 21st September 2023 | +0.00% | 5.25% | 5.25% | £0 |
| 2nd November 2023 | +0.00% | 5.25% | 5.25% | £0 |
| 13th December 2023 | +0.00% | 5.25% | 5.25% | £0 |
| 1st February 2024 | +0.00% | 5.25% | 5.25% | £0 |
| 21st March 2024 | +0.00% | 5.25% | 5.25% | £0 |
| 9th May 2024 | +0.00% | 5.25% | 5.25% | £0 |
| 20th June 2024 | +0.00% | 5.25% | 5.25% | £0 |
| 1st August 2024 | -0.25% | 5.25% | 5.00% | -£13 |
| 19th September 2024 | +0.00% | 5.00% | 5.00% | £0 |
| 7th November 2024 | -0.25% | 5.00% | 4.75% | -£13 |
| 19th December 2024 | +0.00% | 4.75% | 4.75% | £0 |
| 6th February 2025 | -0.25% | 4.75% | 4.50% | -£13 |
| 20th March 2025 | +0.00% | 4.50% | 4.50% | £0 |
| 8th May 2025 | -0.25% | 4.50% | 4.25% | -£13 |
| 19th June 2025 | +0.00% | 4.25% | 4.25% | £0 |
| 7th August 2025 | -0.25% | 4.25% | 4.00% | -£13 |
| 18th September 2025 | +0.00% | 4.00% | 4.00% | £0 |
| 6th November 2025 | +0.00% | 4.00% | 4.00% | £0 |
| 18th December 2025 | -0.25% | 4.00% | 3.75% | -£13 |
| 5th February 2026 | +0.00% | 3.75% | 3.75% | £0 |
| TOTAL | £190 |
*assumed mortgage term of 25 years
How does the Bank of England interest rate decision affect mortgages?
Fixed-rate mortgage customers
Anyone with a fixed-rate mortgage will not see a change to their mortgage rate or their monthly repayments based on the BoE's decision to hold rates at this review. If your deal is due to end soon, you should still consider how mortgage rates might change in the coming months. Our article 'Will interest rates continue to fall in 2026 & how low will they go?' provides some insight into remortgaging and what to do if you are due to remortgage soon. If your mortgage deal is due to end in less than 6 months you can start to shop around and it is beneficial to speak to a mortgage adviser. Mortgage interest rates have begun to edge upwards, albeit slowly and lenders reprice deals frequently so securing a good deal when it comes up could provide significant savings on your new monthly mortgage payment and the overall cost of your mortgage.
It is worth remembering that if your current fixed-rate deal was in place prior to December 2021 (before rates first started going up), then you should factor in all of the subsequent base rate rises and cuts in order to budget for the likely increase in your monthly mortgage repayments after you remortgage. As shown in the table above, this equates to a monthly increase of around £190 per £100,000 borrowed, based on a 25-year mortgage term.
Many borrowers choose to extend their mortgage term, when arranging new mortgages or remortgaging existing deals, in order to make monthly repayments more affordable. This may help in the short-term for those struggling with higher mortgage interest rates but it will mean that the debt is carried further into the future and will end up costing them more in interest payments over the long-term. Extending your mortgage term should be considered carefully with the help of an independent mortgage expert*.
Variable rate or tracker mortgage customers
Those with tracker or variable-rate mortgages tend to see their mortgage rates (and monthly repayments) change in line with the moves in the base rate. This means that your mortgage rate and repayment amount is likely to be adjusted if it tracks the BoE base rate. If you wish to see what a rate cut by the Bank of England would do to your monthly mortgage payment, you can use our interest rate calculator. You will need to know your initial mortgage term, the amount you borrowed at the start of the deal and your current mortgage rate.
Anyone wanting to know more about how rate rises and cuts impact their finances should speak with an independent mortgage adviser* as they can provide specialist advice. When considering remortgaging, always check for any Early Repayment Charges (ERC) and the remaining term of your current mortgage deal. Take a look at the best mortgage deals by using our mortgage rate comparison tool or checking out our article 'Best mortgage rates in the UK'.
Help if you're unable to afford your mortgage payments
Many mortgage holders continue to be faced with increasing mortgage costs due to the rise in mortgage interest rates since 2021. If you are worried about how you will afford your mortgage, then you should get in touch with your lender as soon as possible. Your lender should be able to find a solution that can help ensure no repayments are missed.
Potential solutions can include extending the length of your mortgage, converting part or all of your repayment mortgage to an interest-only mortgage or allowing you to take a mortgage payment holiday.
Check out our article 7 tips for dealing with mortgage arrears, or alternatively, you may find additional support from the following organisations helpful:
How does the Bank of England base rate decision affect you if you have credit cards, loans or overdrafts?
Credit cards
If you have an existing credit card with an agreed interest-free period or promotional interest rate you shouldn't notice any impact from the Bank of England base rate announcement.
Keep in mind that 0% credit cards are the best way to avoid any base rate fluctuations, by not paying interest at all. For example, by moving your existing credit card balance to a 0% balance transfer credit card, you ensure you pay no interest on your repayments if the balance is repaid within the promotional interest-free period. Be aware that most (not all) balance transfer credit cards charge a balance transfer fee, usually somewhere between 2% and 5%. Find out more in our article, 'Best 0% balance transfer credit cards'.
Loans
If you already have a loan with a fixed interest rate then you are unlikely to be affected whether the base rate is changed or not. If you are looking for a new loan then you can compare the best loan deals in our article, 'Best personal loans'.
Overdrafts
The interest rate charged on your overdraft may be affected as a result of the base rate rising or falling. If your bank or building society is going to change the rate of interest charged, you should receive a notification in advance, but it can take time for the change to be communicated.
How does the Bank of England base rate decision affect you if you have savings?
Although interest rates on savings accounts can remain unaffected when the base rate is held, some lenders may change interest on savings products and existing savings promotions may be pulled from the market. You may see some changes to the interest rate paid on your savings, unless you have a fixed-rate bond, for example, over the coming weeks and months.
This also means that it is possible that we may have already hit the peak of high interest rates on savings accounts, so now might be a good time to secure the best rate on your savings. Our article, 'How to get more than 5% interest on your savings' summarises some of the best rates on the market and our regularly updated article 'Best savings accounts in the UK' provides a summary of the best savings rates for personal and business accounts.
Looking for the top savings rates should always involve shopping around for the right deal. You can check out the highest savings rates using our Savings Best Buy tables. Right now you can get as much as 7.5% interest on a Regular Saver account.
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