Will interest rates continue to fall in 2026 or start going back up?

How the Bank of England base rate is set

The Monetary Policy Committee (MPC) is the nine-person committee, within the BoE, that determines the BoE base rate. Usually, every six weeks the Bank announces the MPC's interest-rate decision. You can find a full schedule of decision dates on the Bank of England website. Whenever a decision is announced the MPC meeting minutes are also published. These minutes are scrutinised by investors for any hints of when rates might go up or down in the future. For example, they would see how many of the nine-person committee voted for interest rates to go up, down or stay the same.

When does the market think mortgage rates will next rise or be cut?

The Bank of England has moved the goalposts numerous times in recent years on when interest rates are likely to go up or go down. Of course, when interest rates rise or fall, mortgage rates will follow suit. Below is a short potted history to highlight how we have got to where we are today:

• • Interest rates were slashed after the financial crisis in 2007/2008, from over 5% down to 0.5%, in order to support the UK economy.
  • After much speculation that interest rates would finally go back up in 2015 this didn't happen because inflation suddenly turned negative. For an economy to attain a healthy level of growth the BoE aims for an official inflation target of 2%. Raising rates tends to send inflation lower, therefore the BoE left interest rates unchanged.
  • The Brexit vote was a huge game-changer. The previous talk was all about when interest rates would go up. Suddenly the talk became concerned with the chance of an economic slump because the UK had decided to leave the European Union. The Bank of England was so concerned that it decided to cut interest rates from 0.5% to 0.25% in August 2016 and launch a new bout of Quantitative Easing (QE) to try and stimulate economic growth.
  • Yet the UK economy proved surprisingly resilient after the EU referendum. It led some people, even the then Prime Minister Theresa May, to suggest that the BoE overreacted when it cut interest rates.
  • The Bank of England finally raised interest rates in November 2017 for the first time in over a decade, back to 0.5%.
  • Then in August 2018 the Bank of England raised the bank base rate from 0.5% to 0.75% as the economic outlook improved. This was the highest level in almost a decade.
  • However, the arrival of the COVID-19 pandemic changed everything and the BoE carried out two emergency interest rate cuts in March 2020, first from 0.75% to 0.25% and then from 0.25% to 0.1%.
  • Between December 2021 and August 2023 the BoE increased its base rate at 14 consecutive meetings, taking the base rate from 0.1% to 5.25%, which was the highest level in over 15 years. The BoE was attempting to quell rising inflation which was above the BoE's official target of 2%.
  • Between September 2023 and July 2024 the BoE kept the base rate unchanged at 5.25%.
  • On 1st August 2024, the Monetary Policy Committee (MPC) voted to cut the BoE base rate by a quarter of a percentage point, to 5%.
  • On 7th November 2024, the Monetary Policy Committee (MPC) voted to cut the BoE base rate from 5% to 4.75%.
  • On 6th February 2025 the MPC voted to cut the base rate from 4.75% to 4.5%.
  • On 8th May 2025 the MPC voted to cut the base rate from 4.5% to 4.25%.
  • On 7th August 2025 the MPC voted to cut the base rate from 4.25% to 4%.
  • On 18th December 2025 the MPC voted to cut the base rate from 4% to 3.75%.
  • The market is now pricing in that the BoE base rate will not be cut any further and could instead be raised later this year to 4.25% and will remain elevated over the next five years. 

The indicators to watch that will determine when interest rates go up or down

The BoE uses a number of economic indicators when deciding whether rates will rise or be cut. So understanding the key economic indicators is important when judging when interest and mortgage rates are likely to rise or be cut. Below is a roundup of the most important indicators to keep an eye on.

• Inflation concerns have risen – The annual UK inflation rate rose from a recent low of 1.7% in September 2024 to 3.8% before falling back to 3.0% in January 2026. The BoE had expected inflation to fall further, back to the BoE's 2% target by April 2026. However, the spike in oil and gas prices, as a result of the Middle East conflict, has fuelled concerns that inflation will spike once again. If that is the case, and price rises prove persistent, the BoE may have to consider raising interest rates again. Worryingly, the first inflation reading since the start of the Iran war has now confirmed that the UK's inflation rate has risen to 3.3%, its highest level since December 2025.
• The Bank of England rate-setting committee has hit the pause button – While the 9-person MPC was sharply divided 5-4 in February 2026, the sudden economic shock of the Middle East conflict caused a rapid shift in consensus. At the April 2026 meeting, the committee voted (8-1) to hold the base rate at 3.75%. The minutes revealed that one member voted to raise the base rate by 0.25%.
• The UK economy is stalling – The accepted definition of a recession is when the economy shrinks for two consecutive quarters, a feat the UK last achieved in the second half of 2023. While the UK is avoiding a recession, growth has nearly flatlined. The UK economy grew by just 1.3% in 2025, below the Bank of England's projection of 1.4% and the Office for Budget Responsibility (OBR) prediction of 1.5%. Weak economic growth significantly increases the pressure for an interest rate cut to stimulate activity, whereas strong growth would make a hold or rise more likely to prevent overheating.
• The unemployment rate has unexpectedly fallen – The number of people employed rose by 107,000 in the three months to March and the unemployment rate unexpectedly fell from 5.2% to 4.9%, which is the lowest level since August 2025. Strong employment numbers increase the chances of an interest rate rise as do rising wages, while weak employment numbers make interest rate cuts more likely.
• UK economic growth forecasts have been mixed – In November 2025 the Office for Budget Responsibility (OBR) lowered its UK growth forecast for 2026 to 1.4%. At its rate-setting meeting in February 2026, the BoE downgraded its growth forecast for 2026 to 0.9%, significantly lower than the 1.2% it previously predicted. A slump in economic growth increases the chances of another interest rate cut.

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What to do next

When deciding whether to fix your mortgage rate it's important to calculate the impact of an interest rate rise and seek advice from a mortgage expert ahead of time by following the steps below.

Whether you are on a tracker mortgage, variable rate mortgage or looking to remortgage your existing fixed-rate deal that is coming to an end, the steps below will take you a few seconds, but could prevent your mortgage repayments from crippling your finances in the future and help you secure a lower rate while they are still available.

Step 1 – Calculate the impact on your monthly mortgage payments

Quickly calculate the impact of an interest rate cut (or rise) on your mortgage payments with this interest rate calculator. Just enter the original details of your mortgage, such as the original amount borrowed and the original term to see how your monthly mortgage payments could change based on different interest rate rises.

So let's say you had borrowed £200,000 for 30 years at a variable rate of interest. In the calculator you would enter the original loan amount (£200,000 on a repayment basis), the original term (30 years) and the current rate of interest you are paying (let's assume 4.5%).

The Bank of England base rate is currently 3.75%. With the market now pricing in the possibility of interest rates staying higher for longer or even rising to 4%, let's say you want to see the impact if the base rate was increased by 0.25% (to 4.0%). You just enter 0.25% into the ‘anticipated rate change' box and click calculate.

The result shown below the interest rate calculator tells you that your current mortgage repayment would increase from £1,013 a month to £1,043 a month. That's an extra £30 per month you would need to find.

However, if you have a fixed-rate mortgage deal then your monthly repayments won't automatically change if the Bank of England base rate is cut or increased, but you may be wondering how much your repayments will be when you come to remortgage.

Even though the base rate has been cut six times since August 2024, those cuts have now been paused due to the global energy shock. This means those coming to the end of a 5-year fixed-rate deal will almost certainly end up paying more on their new mortgage deal, especially as lenders have begun raising their fixed rates again. You can use our interest rate calculator to work out how much your future repayments are likely to be.

So let us assume the same numbers used above but with a fixed-rate mortgage at 2.5% that is due to come to an end.

First, use the calculator to see your current payment. Enter your original loan (£200,000), whether it's repayment or interest-only (assume repayment), the original term (30 years), and your current fixed rate (e.g. 2.5%). Set the ‘anticipated rate change' box to ‘0'. This gives you your current payment of £790 per month.

Now, let's assume a realistic new fixed-rate deal you can get is 5% (a rate that is becoming more common as lenders react to the BoE holding the base rate at 3.75%). Enter ‘0' in the ‘anticipated rate change' box and change the ‘current interest rate' from 2.5% to 5%, amend the mortgage term and then click ‘calculate' again (for this simple example, we will keep the original term).

This shows your new monthly payment would be £1074. That's an increase of £284 per month that you'd need to find.

Of course, this is only a guide as to what your new mortgage repayments might be as it doesn't take into account the reduction in the size of your mortgage as a result of your previous monthly repayments.

Once you have the result, move on to step 2 below.

Step 2 – The best way to find out your mortgage options

Most consumers will wrongly assume that using a price comparison site is the best thing to do when looking to remortgage. However, bear in mind:

• • many mortgage deals are only available via mortgage advisers so don't appear on price comparison sites
  • not everyone can get the rates quoted on price comparison sites

• price comparison sites don't take into account your credit rating or personal circumstances, which will determine whether a lender will actually lend to you. For example, you may not be eligible for the deals quoted by comparison sites and won't find out until they credit check you. That in itself will then hinder future mortgage applications

That is why you are almost always better off dealing with an independent mortgage adviser rather than going it alone. This is why 70% of borrowers now use a mortgage adviser to find the best deal from a lender who will actually lend to them. Therefore, we recommend getting in contact with a mortgage adviser yourself. You can arrange a free remortgage review using this online tool*.

If you already have an independent mortgage broker that you trust then I suggest you get in touch with them as there has never been a better time to remortgage.

Further reading – should you fix your mortgage rate now

• ‘Should you fix your mortgage rate now?'

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