Base Rate 3.75%: What the Bank of England’s Latest 'Hold' Means for You

The Bank of England has announced its latest decision: the official Base Rate is held at 3.75%

While many homeowners were hoping for a Valentine's gift in the form of a rate cut, the Monetary Policy Committee (MPC) has opted for caution. Following the cut to 3.75% just before Christmas, this month's decision to "hold" wasn't entirely unexpected, but it was a "knife-edge" vote that reveals a lot about where the economy is heading in 2026.

If you are wondering how a Base Rate of 3.75% affects your mortgage payments, savings returns, or property plans, we’ve broken down the key details below.

Why Did the Bank of England Hold the Rate?

The decision to keep the Base Rate at 3.75% was driven largely by inflation data. While the Bank’s target is 2%, inflation ticked up slightly to 3.4% in the 12 months to December 2025, up from 3.2% the previous month.

This slight rise forced the Bank to hit the pause button to ensure inflation is fully under control before easing policy further.

However, the decision was incredibly close. The nine-member committee voted 5–4 to hold the rate, meaning four members actually voted for an immediate cut to 3.5%. Governor Andrew Bailey, who voted to hold, noted that while they need to be careful, "there should be scope for some further reduction in Bank Rate this year".

When Will Interest Rates Go Down?

The close 5–4 split suggests that a rate cut is drawing closer. The "hold" today effectively shifts the timeline for the next potential drop.

  • Spring Prediction: Economic experts and markets are now eyeing April 2026 as a likely moment for the next cut, once the impact of government energy price subsidies kicks in and inflation is expected to fall back toward 2%.

  • Long-term Outlook: Most analysts still predict a downward trend for the rest of 2026, potentially bringing the rate toward the 3.25%–3.5% range by the end of the year.

What a Base Rate of 3.75% Means for Your Mortgage

1. Fixed-Rate Mortgages

If you are on a fixed-rate deal, your monthly payments will not change today.

The good news for those looking to remortgage is that lenders have already "priced in" future cuts. Average rates have dropped significantly from their 2023 peaks:

  • 2-year fixed rates: Averaging approximately 4.25%.

  • 5-year fixed rates: Averaging approximately 4.37%.

2. Standard Variable Rates (SVR) & Tracker Mortgages

If you are on a tracker mortgage, your rate will remain unchanged at the current level.

However, if you are sitting on your lender’s Standard Variable Rate (SVR), you are likely paying significantly more than you need to. The average SVR is currently hovering around 6.91%. With the Base Rate at 3.75% and fixed deals much lower, switching now could save you thousands.

Impact on Landlords

For buy-to-let investors, the hold offers some stability.

Borrowing Costs: The cost of borrowing is becoming more "pragmatic" and competitive, which may help with refinancing this year.

Market Sentiment: Despite the hold, there is optimism in the market, with 4 in 10 landlords planning to refinance in the coming year.

Conclusion: A Season of Stability?

While the Base Rate remains on hold at 3.75% for now, the direction of travel seems clear: rates are likely to fall as we head into Spring. For homeowners, landlords, and prospective buyers, this period of stability offers a chance to plan with more certainty than we’ve seen in recent years.

Whether you decide to lock in a mortgage deal now or wait for the potential cuts predicted for April, the key is to stay informed and not rely on guesswork. The property market is moving, and with inflation stabilising, 2026 is shaping up to be a year of opportunity for those who are prepared.

⚠️ Important Disclaimer: Not Financial Advice

Please note: We are not trained financial advisers. The content of this article is for informational and educational purposes only and does not constitute financial advice.

Every individual’s financial situation is different. Before making any significant decisions regarding your mortgage, savings, or investments, we strongly recommend you speak to a qualified and regulated financial adviser who can provide tailored advice based on your personal circumstances.

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