The Bank of England base rate is important as it impacts how much you repay when you borrow money, as well as the return on your savings
The Bank of England has held its base interest rate at 4.25%. The base rate is important as it impacts how much you repay when you borrow money, as well as the return on your savings.
When it gets updated, banks and lenders will update the interest rates on everything on mortgage products to savings to reflect the Bank of England decision.
Most economists had predicted the base rate would be kept at 4.25%. The Bank of England uses its base rate to keep inflation – which is a measure of price rises – under control.
Inflation eased to 3.4% in May but this is still higher than the 2% target the Bank of England is aiming for. Interest rates are now at their lowest level for two years, having slowly been reduced from their peak of 5.25%.
The base rate reached this level in August 2023 and remained this high until August 2024, when the Bank of England finally cut it to 5%.
It has been cut a further three times since then, to its current level of 4.25%. The most recent cut was announced during the last Bank of England meeting in May 2025.
The Bank of England Monetary Policy Committee (MPC) voted today by a majority of six-to-three in favour keeping the base rate at 4.25%. Three members – Swati Dhingra, Dave Ramsden and Alan Taylor – voted to reduce it to 4%.
Bank of England governor Andrew Bailey hinted at further rate cuts to come, saying: “Interest rates remain on a gradual downward path, although we’ve left them on hold today.”
But he warned: “The world is highly unpredictable.” Mr Bailey added that there were “signs of softening in the labour market” referring to signs that wage growth is slowing, which can be a good in terms of controlling inflation.
However, there are fears that energy prices could rise again following the escalating conflict between Israel and Iran, which is sending oil prices higher.
Mr Bailey added: “We will be looking carefully at the extent to which those signs feed through to consumer price inflation.”
I have a mortgage – how does it affect me?
If you have a tracker mortgage, then this follows the movement of the base rate. As the base rate has not changed, then you won’t see any change to your monthly repayments for now.
If you have a standard variable rate (SVR) mortgage, then it is down to your mortgage lender to decide if they pass on any base rate changes.
There are around 1.3 million households on a tracker or SVR mortgage. If you have a fixed rate mortgage, your payments don’t move in line with the base rate, as you’ve already agreed to pay a fixed amount each month for a set period of time.
This means your payments won’t change until your fixed deal has ended, regardless of what happens with the base rate. Many people are finding they are paying much more when they come to remortgage from a cheaper deal.
If you don’t fix into a new deal, you’ll usually be moved to the SVR of your existing lender once your current mortgage deal ends. An estimated 1.8 million fixed rate mortgages are set to expire in 2025.
Matt Smith, Rightmove mortgage expert said: “Lenders have a bit of room to reduce rates further even with a hold in the bank rate today so home-movers can still be hopeful of some small mortgage rate cuts over the next couple of weeks.
“Average rates have been pretty flat in recent weeks, but we have seen increasing signs of competition amongst lenders as they have reduced their stress-testing criteria and with new mortgage products coming back to market, lenders are looking at ways to support more people get the home that they want.”
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I have a credit card and loan – how does it affect me?
If your credit card is linked to the base rate, then how much you pay back in interest can change when it is updated. The average credit card purchase APR is around 35%.
Interest rates on personal loans and car financing are normally fixed, so these should not change as you have already agreed set repayments.
If you are planning on taking out a new credit card or loan, you will likely find the rates on offer are still higher than they were previously.
I have savings – how does it affect me?
Saving rates have come down slightly from their recent highs, following the previous Bank of England cuts – but the good news is, the best deals are still higher than the rate of inflation.
Cash ISAs currently pay more than easy-access accounts. MoneySavingExpert.com lists the best rate are 4.86% from Trading 212. You can pay up to £20,000 into an ISA each tax year and any interest you make is free from tax.
The top easy-access rate today is 4.75% from Atom Bank however the rate falls to 2.5% in the months you make a withdrawal. If you can afford to lock your cash away, a one-year fixed rate of 4.5% is available from Cynergy Bank and LHV Bank.
For a smaller fix, it is possible to get a rate of 4.52% locked for six months for Investec via the savings platform Prosper. Regular savings accounts offer the best rates, but these come with strict terms and conditions.
You’re normally only allowed to make small deposits each month and some accounts restrict how many withdrawals you can make. Principality Building Society pays 7.5% fixed for six months but you can only deposit up to £200 each month.
Amy Knight, personal finance expert at NerdWallet UK, said: “Moving your savings to an account paying more than 3.5% interest means you’ll gain enough to make up for the value that inflation steals.
“The sooner you take this step, the easier it will be to swallow future price increases if CPI remains high for many months.“