Last updated: 29 July 2026 · Sourced from official UK government publications
This is a plain-English definitions guide. All figures and rules are drawn from Bank of England and gov.uk official sources. This is not financial advice, see the disclaimer below.
The base rate is one of the most important numbers in UK finance. It affects your mortgage repayments, what your savings earn, and the cost of any borrowing, yet most people don’t really know what it is or how it works. Here’s the plain English version.
The Bank of England base rate (also called Bank Rate) is the interest rate the Bank of England charges commercial banks for overnight borrowing. It acts as a benchmark for the entire UK economy, banks borrow at the base rate, then lend to consumers at higher rates. Almost every interest rate you encounter, mortgage, savings, credit card, is influenced by it.
The Bank of England base rate is 3.75%. It has been at that level since December 2025, when the Monetary Policy Committee voted 5 to 4 to cut it from 4.00% to 3.75% at the meeting ending 17 December 2025. Every decision since then has been a hold. Here is that last change alongside the most recent decision:
| MPC meeting | Decision | Base rate after |
|---|---|---|
| Ending 17 December 2025 | Cut from 4.00% to 3.75%, vote 5 to 4 | 3.75% |
| Ending 17 June 2026 | Held, vote 7 to 2 | 3.75% |
Those figures reflect the position on 29 July 2026. The next scheduled MPC announcement after this page was updated is 30 July 2026, and the Bank publishes the outcome of every meeting on its own site, so that is always the place to check the live number.
The reason the rate has stopped moving is that CPI inflation has been running close to, but not quite at, the Bank’s 2% target. It was 2.6% in the 12 months to June 2026. When inflation is near target, the case for moving the rate in either direction gets weaker, which is why holds tend to come in runs.
The base rate affects your mortgage differently depending on the type you have. Tracker mortgages rise and fall directly in line with the base rate, so payments change almost immediately. Standard variable rate (SVR) mortgages broadly follow but at your lender’s discretion. Fixed-rate mortgages are unaffected during the fixed term, but new deals will reflect where rates are when you come to remortgage. The mechanics behind all three sit in the guide to how a UK mortgage works.
One thing that trips people up: lenders do not price fixed deals off today’s base rate. They price them off what markets expect the base rate to average over the next few years. That is why a fixed rate can fall in the weeks before a cut is announced, and why it can sit above or below the base rate at any given moment rather than tracking it.
If you are buying rather than remortgaging, the borrowing rate is only one of the costs. Stamp Duty Land Tax is charged on the purchase price and is completely unaffected by what the base rate is doing.
The right mortgage type depends on your personal circumstances. Always speak to a qualified mortgage adviser before choosing or switching a mortgage product.
When the base rate rises, banks can afford to pay more interest on savings accounts, though they are not obliged to pass on the full increase. When the base rate falls, savings rates typically follow. Variable-rate accounts track the base rate broadly, while fixed-rate savings accounts lock in a set rate for a defined term. It is worth comparing providers when the rate changes, as differences between accounts can be significant.
Pass-through is usually slower and less complete on the way up than on the way down. A quarter point cut often reaches easy-access savings rates within weeks, while a quarter point rise can take months to appear in full, if it appears at all.
What the base rate does not change is the tax treatment of the interest. Interest earned inside a cash ISA is tax free whatever the rate is, and the annual ISA allowance is £20,000 for 2026/27. The same applies to interest and growth inside a stocks and shares ISA, and to the cash sitting in a Lifetime ISA while you are saving towards a first home.
The base rate matters less for investing than people assume. Share prices react to rate expectations, but there is no direct link between the base rate and what a fund returns, and none of the ISA rules move when the MPC votes.
The Bank of England changes the base rate to control inflation, which it is mandated to keep close to 2%. Raising the rate makes borrowing more expensive, which slows consumer spending and reduces upward pressure on prices. Cutting the rate encourages borrowing and investment, stimulating growth when the economy is weak. The balance between the two is the core of UK monetary policy.
This balancing act is tricky, raise rates too much and you tip the economy into recession; cut too aggressively and inflation runs out of control.
The base rate also works slowly. The Bank generally reckons a rate change takes months to feed through into spending and prices, which is why the MPC reacts to where it expects inflation to be rather than where it is today. And it has no reach at all over prices that are set by regulation rather than by markets, which is why the Ofgem energy price cap can move sharply in a quarter when the base rate has not moved at all.
The Monetary Policy Committee (MPC) sets the base rate. It is a nine-member committee at the Bank of England, comprising the Governor, Deputy Governors, Bank officials, and independent external members appointed by the Chancellor. The MPC votes on the rate eight times a year, with decisions announced at around noon on the meeting day.
The Bank of England base rate (also called Bank Rate) is the interest rate the Bank of England charges commercial banks for overnight borrowing. It acts as a benchmark that influences the interest rates banks offer to consumers and businesses on mortgages, savings accounts, loans, and credit cards across the UK economy.
The Bank of England base rate is 3.75%. It has been at that level since December 2025, when the Monetary Policy Committee voted 5 to 4 to cut it from 4.00% to 3.75% at the meeting ending 17 December 2025. At its meeting ending 17 June 2026 the MPC voted 7 to 2 to hold the rate at 3.75%. This reflects the position on 29 July 2026.
The impact depends on your mortgage type. Tracker mortgages move directly in line with the base rate, so monthly payments change immediately when the rate changes. Standard variable rate (SVR) mortgages usually follow but at lenders' discretion. Fixed-rate mortgages are unaffected during the fixed term, but new fixed deals are priced using market expectations of where rates are heading.
The Bank uses the base rate as its main tool to control inflation. When inflation is above its 2% target, raising the rate makes borrowing more expensive and saving more attractive, which slows spending and reduces price pressure. When inflation is below target or the economy is weak, lowering the rate encourages borrowing and spending to stimulate growth.
Yes, though not automatically. When the base rate rises, savings rates on easy-access accounts and fixed-term deposits typically increase, but banks are not obliged to pass on the full change. When the base rate falls, savings rates generally fall too. It is worth comparing rates across providers when the base rate changes, as the spread between accounts can be significant.
The Monetary Policy Committee (MPC) sets the base rate. The MPC has nine members, the Governor of the Bank of England, Deputy Governors, Bank officials, and independent external members appointed by the Chancellor. The committee meets roughly every six weeks and votes on whether to change, hold, or cut the rate.
Kvanta covers every Bank of England announcement the morning it’s released. In plain English. Before 8am.
Subscribe free →