What Is the Bank of England Base Rate?

What is the Bank of England base rate?

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 is a benchmark for the whole UK economy. Banks borrow at the base rate and then lend to consumers at higher rates. Almost every interest rate you come across, such as on mortgages, savings and credit cards, is influenced by it.

What is the current base rate?

The Bank of England base rate is 3.75%. It has been at that level since December 2025. The Monetary Policy Committee voted 5 to 4 to cut it from 4.00% to 3.75% at the meeting ending 17 December 2025. The Bank has held the rate at 3.75% since its December 2025 cut, including at its June and September 2026 meetings. The table shows that last change and the June 2026 hold:

Those figures reflect the position as at 16 October 2026, after the rate was also held at the September 2026 meeting. The next scheduled MPC decision is on 5 November 2026. The Bank of England’s Monetary Policy Summary on bankofengland.co.uk is the official source for the live rate.

The rate has stopped moving because CPI inflation has been running above the Bank’s 2% target. It was 3.1% in the 12 months to August 2026. When inflation is near target, the case for moving the rate in either direction gets weaker. That is why holds tend to come in runs.

How does the base rate affect my mortgage?

The base rate affects your mortgage in different ways, depending on its type. Tracker mortgages rise and fall directly 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 not affected during the fixed term. New deals will reflect where rates are when you remortgage. The guide to how a UK mortgage works explains how all three work.

• Tracker mortgage: directly follows the base rate. If the base rate rises by 0.25%, your monthly payments go up almost immediately.
• Standard variable rate (SVR): set by your lender, but broadly tracks the base rate. Your lender can change it at any time.
• Fixed-rate mortgage: locked in at the rate you agreed when you took it out. Base rate changes don’t affect you until your fixed term ends. When you remortgage, the new rate will reflect where the base rate is at that point.

This often catches people out. 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. It can also sit above or below the base rate at any moment, rather than tracking it.

If you are buying rather than remortgaging, the borrowing rate is only one cost. Stamp Duty Land Tax is charged on the purchase price. It is completely unaffected by the base rate.

Your personal circumstances decide the right mortgage type. Always speak to a qualified mortgage adviser before you choose or switch a mortgage product.

How does the base rate affect savings accounts?

When the base rate rises, banks can afford to pay more interest on savings. They are not obliged to pass on the full increase. When the base rate falls, savings rates typically follow. Variable-rate accounts broadly track the base rate. 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. A quarter point rise can take months to appear in full, if it appears at all.

The base rate does not change the tax treatment of interest. Interest earned inside a cash ISA is tax free whatever the rate is. The annual ISA allowance is £20,000 for 2026/27. The same applies to interest and growth inside a stocks and shares ISA. It also applies to cash held in a Lifetime ISA while you save towards a first home.

The base rate matters less for investing than many people think. Share prices react to rate expectations. But there is no direct link between the base rate and what a fund returns. None of the ISA rules change when the MPC votes.

Why does the Bank of England change the base rate?

The Bank of England changes the base rate to control inflation. It has a mandate to keep inflation close to 2%. Raising the rate makes borrowing more expensive. This slows consumer spending and reduces upward pressure on prices. Cutting the rate encourages borrowing and investment. This stimulates growth when the economy is weak. Getting that balance right is the core of UK monetary policy.

• Inflation too high? Raise the base rate. Higher borrowing costs mean people spend less, which reduces demand and slows price rises.
• Economy struggling? Cut the base rate. Cheaper borrowing encourages spending and investment, which stimulates growth.

This is a tricky balance. 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. That is why the MPC reacts to where it expects inflation to be, not where it is today. The base rate has no reach at all over prices set by regulation rather than by markets. That is why the Ofgem energy price cap can move sharply in a quarter when the base rate has not moved at all.

Who decides the base rate?

The Monetary Policy Committee (MPC) sets the base rate. It has nine members at the Bank of England. They are the Governor, Deputy Governors, Bank officials and independent external members appointed by the Chancellor. The MPC votes on the rate eight times a year. Decisions are announced at around noon on the meeting day.