The Monetary Policy Committee (MPC) at the Bank of England (BoE) has voted to hold the base rate at its current level of 4.00%. The members of the committee voted with a majority of 7 to 2 to keep the base rate the same against a backdrop of sticky inflation that remained at 3.8% for the year to August due to food price rises as well as increases to the cost of hotel stays.
What is the Bank of England base rate?
The base rate determines how much the Bank of England 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. If it is held, providers may still change rates and a base rate hike will usually mean interest rates are increased.
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 4.00% signals that the MPC is exercising some caution due to the persistent inflation reflected in August, which it predicts will rise to 4% next month, double the Bank's target rate of 2%. Rising consumer costs for food and drink will be of particular concern as these affect the largest number of consumers.
Although wage growth is still keeping pace with inflation, it is showing signs of slowing down according to the most recent report from the Office for National Statistics. 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.
Comments from the MPC review meeting noted that, "Twelve-month CPI inflation was 3.8% in August, and is expected to increase slightly in September, before falling towards the 2% target thereafter. The Committee remains alert to the risk that this temporary increase in inflation could put additional upward pressure on the wage and price-setting process. Pay growth remains elevated, but has fallen and is expected to slow significantly over the rest of the year." It also repeated the comments, "A gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate."
August's base rate cut came after a very close vote of 5-4 - the initial deadlock vote had to be repeated to reach a majority, reflecting the varied outlooks of committee members. It was the third base rate cut of 2025. Predictions were that the BoE would cut the base rate four times this year but any further cuts this year will be dependent on how the economy holds up. Importantly, there are still two more opportunities for the MPC to vote this year in November and December.
The US Federal Reserve responded to a weakening job market on the 17th of September by electing to cut the benchmark interest rate by 0.25% meaning it now stands at a range of 4.00% to 4.25%. Meanwhile, at its meeting on the 11th of September, the European Central Bank (ECB) held the current deposit facility rate at 2.00%. Inflation in Europe is around the target level of 2% and is unlikely to change over the forthcoming months, but uncertainty around tariff deals continues, with many negotiations still to take place, including decisions on the tariff to be applied to wine and spirits.
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 - September 2025
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 |
| TOTAL | £203 |
*assumed mortgage term is 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 2025 & 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 £203 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 decision. 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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