The Bank of England opted to hold interest rates at 3.75 per cent today, but a cut in March is now thought likely.
Four members of the Monetary Policy Committee opted for a cut to 3.5 per cent, but five members – including Bank of England Governor Andrew Bailey – voted to hold firm at 3.75 per cent.
In December, the bank cut interest rates from 4 per cent to 3.75 per cent, down from a high of 5.25 per cent the previous year.
The next decision will take place on 19 March, with the majority of analysts now expecting a cut to 3.5 per cent.
The decision hinges on what happens to the rate of inflation, but also the health of the overall economy.
Consumer Price Index inflation rose to 3.4 per cent in December, according to the latest figures from the Office For National Statistics, up from 3.2 per cent in November.
Meanwhile, the UK economy grew by just 0.1 per cent in the three months to November 2025, with manufacturing and white-collar services countering weakness in consumer-facing services and construction.
Hold: The central bank is expected to cut interest rates next month after opting to hold today. Pictured – Bank of England Governor Andrew Bailey
Today’s decision to hold rates is bad news for households hoping to see the cost of their mortgage reduce.
However, it will be received positively by savers, as interest on their accounts usually falls if the base rate goes down.
We explain what the Bank of England’s decision to hold rates at 3.75 per cent means for your mortgage and savings.
What does this mean for mortgage borrowers?
Today’s decision to hold the base rate at 3.75 per cent will seem like bad news for mortgage borrowers.
However, most borrowers will not see an immediate benefit, unless they were on a tracker mortgage that follows the Bank of England’s rate.
Lenders usually base their mortgage rates on predictions for the longer-term trajectory of interest rates, rather than reacting to individual base rate decisions.
Mortgage rates were back on the rise this week. Nationwide Building Society upped rates by 0.19 percentage points, while Barclays and Virgin Money also increased them by to 0.15 percentage points and Santander edge rates higher by up to 0.07 percentage points.
It comes after months of gradual rate cuts that saw the lowest mortgage rates move from 4 per cent to about 3.5 per cent.
The cheapest two-year fix for someone moving home with a 40 per cent deposit is currently 3.55 per cent, while the cheapest five-year fix is 3.73 per cent.
David Hollingworth, associate director at broker L&C Mortgages says that while interest rates are likely to be cut again this year, that doesn’t mean mortgage rates will follow suit.
‘With a good deal of uncertainty in air, the outlook could shift,’ says Hollingworth.
‘We are currently seeing lenders edging their fixed rates up slightly as market rates have nudged up. As more lenders lift rates it’s only more likely that we will see others follow suit, so there’s no room for borrowers to be complacent.
‘Those that have a deal expiring later in the year should stick to securing a rate a few months ahead. That will secure the rate but still allow a review before completion if rates start to fall again.’
What next for mortgage rates?
The expectation is that the Bank of England will cut rates one or two more times in 2026 to either 3.5 per cent or 3.25 per cent.
This expectation has fed through into Sonia swaps, an inter-bank lending rate which forecasts where mortgage rates will be in two or five years. Lenders use this to determine fixed-rate mortgage pricing.
Two-year swaps are currently at 3.51 per cent and five-year swaps are at 3.73 per cent. – trending very close to the lowest fixed rate deals. It is very rare for the lowest fixed rate deals to be lower than swaps, so at present there is little to no margin for lenders to price mortgages lower.
However, if money markets start to anticipate that interest rates could head lower, then this will likely feed through into mortgage rates.
That said, the Bank of England is expected to proceed cautiously.
Analysts at Barclays think that a general trend of falling inflation, slowing wage growth and rising unemployment will motivate the MPC to cut base rate in March to 3.5 per cent.
However, its analysts then think the MPC will enter ‘wait-and-see’ mode.
Without a more material weakening of the labour market or inflation falling to target of 2 per cent or below, interest rates may remain at 3.5 per cent throughout 2026.
However, there are some forecasts that suggest interest rates will fall further.
Economists at Morgan Stanley and Capital Economics forecast that interest rates will fall to 3 per cent by the end of 2026.
‘Markets continue to price a gradual easing path rather than an aggressive cutting cycle,’ said Nicholas Mendes of mortgage broker John Charcol.
‘Current swaps imply bank rate drifting lower over time, but in measured steps. Mortgage rates won’t necessarily stay the same, but probably moving in smaller, less frequent steps rather than the steady run of reductions we saw earlier in the year.’
What should borrowers do now?
Nearly one million households face a painful spike in their monthly mortgage payments this year as their cheap fixed-rate deals come to an end.
Back in 2021, a total of 971,105 five-year fixed-rate mortgage products were taken out, which could have been on interest rates as low as just 0.91 per cent according to Financial Conduct Authority data analysed by Compare the Market.
What does this mean for your savings?
The base rate affects how much interest savers can earn on their money. In general, savings rates rise when the base rate is rising, and fall when it is falling.
Now that the base rate has been held at 3.75 per cent, savers might expect savings rates to hold steady.
But this is no reason to rejoice, say experts, as the damage has already been done since the base rate was cut to 3.75 per cent in December.
Rates scrutineer Moneyfacts Compare’s Rachel Springall says the base rate hold is ‘irrelevant’ as the damage has already been done to the savings markets over the last 12 months.
You can see the latest easy-access and fixed savings rates on This is Money’s independent best-buy savings tables.
Meanwhile, James Blower, founder of website the Savings Guru says: ‘Although savers could be inclined to think that this news will mean no change to interest rates on savings, they could be wrong.
‘Rates are currently overpriced for a base rate of 3.75 per cent, with market expectation of a cut to 3.5 per cent in the summer.
‘We have seen more cuts than increases so far this year and we think that the trend of rates easing back gently will continue.’
What next for savings rates?
Savings rates have been on a downward trend since the base rate started coming down. Interest rate cuts reduce the amount banks earn on their own cash reserves, and this is passed on to customers.
Andrew Hagger, founder of personal finance website MoneyComms says: ‘Savings rates have fallen in recent weeks as the 18 December rate cut has filtered through, however, I expect savings rates to stabilise over the next six weeks, which will be a welcome relief to savers.
More than two thirds of savings providers have cut rates since the start of 2026 so expect savings rates to settle at a lower level.
Since the start of August, just before the base rate was cut to 4 per cent, the average easy access savings rate has fallen from 2.68 per cent to 2.54 per cent and the average easy access Isa rate has fallen from 2.9 per cent to 2.71 per cent.
The best savings rates will likely continue to fall in the coming months.
Those who keep their cash in easy-access accounts are most at risk of rate cuts. Rachel Springall says: ‘ A year ago, savers could scrape an average return of 2.92 per cent on an easy access account, that’s now down to 2.42 per cent.
‘The cash Isa equivalent has seen a similar drop from 3.06 per cent to 2.60 per cent; they both sit at their lowest levels since July 2023.’
The average savings rate has fallen over the past 12 months to 3.31 per cent, its lowest point since May 2023. The rate was last above 4 per cent in January 2024. This means, overall, savers are losing money in real terms as inflation is higher.
Going down: Those who keep their cash in easy-access accounts are most at risk of rate cuts
What should savers do now?
Savers should keep a close eye on their savings, whether they are stashed in an easy-access account, fixed-rate account or an Isa as rates are expected to fall across the board.
If your money is earning interest at a rate of less than the rate of consumer price inflation, 3.4 per cent, you should consider moving it to an account paying a better rate.
Andrew Hagger says: ‘Even though the base rate hasn’t changed, I’d urge savers to check with their bank for the latest rate on their nest egg as it may be earning far less than they thought.
‘If your cash is stagnating in a sub 2 per cent rate with your high street bank, it’s time to dich and switch to a better deal – take a look at a straightforward best buy deal and double your savings income with the likes of such as Spring Easy Saver at 4.11 per cent or Charter Savings Bank at 4.06 per cent.
‘Neither of these accounts restricts your withdrawals or inflates the rate with a short term bonus.’
Savers should strongly consider using a cash Isa to protect the interest they earn from being taxed.
Isa accounts may be the one area of the savings market where rates hold up as providers battle it out for customers in the run up to the end of the tax year.
James Blower says: ‘The exception to rates being overpriced could be Isas where we may see some activity in late March and early April as providers seek to entice Isa savers for the last year of £20,000 allowance for all.’
The annual tax-free allowance will be cut to £12,000 from April 2027, apart from for over-65s, under plans announced at the November Budget.
Best savings rates and how to find them
The best easy-access savings accounts with no restrictions pay 4.11 per cent.
Spring has an easy-access deal paying 4.11 per cent. Someone putting £10,000 in this account could expect to earn around £411 in interest after a year, if the rate remained the same.
Those with cash they won’t immediately need over the next year or two should consider fixed-rate savings.
The best one-year deal is offered by Access Bank and pays 4.25 per cent. A saver putting £10,000 in this account will earn a guaranteed £424 interest over one year. It comes with full protection under the Financial Services Compensation Scheme up to £85,000 per person.
Cynergy Bank is offering 4.24 per cent, while Oaknorth Bank and Union Bank of India are paying 4.23 per cent. All offer FSCS protection.
The best two-year bond pays 4.2 per cent and comes from Access Bank.
For those who wish to lock their savings away for longer, Access Bank also offers the best three-year bond which pays 4.2 per cent and Hampshire Trust Bank has the best five-year deal paying 4.31 per cent.
Our pick of the best cash Isas are featured below and you can check our cash Isa savings tables for all the top deals.