Interest rate stays at 4.75%: what does it mean for you?

No change from the Bank of England this month as expected

We’ve taken a look at the thinking behind this latest decision, and whether we’re likely to see any cuts next year.

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What is the Bank of England base rate?

The interest rate set by the Bank of England (BoE) is known as the base rate.

The current rate was decided on 19 December 2024, remaining at 4.75%, after being cut from 5% in November 2024. This is the lowest rate since June 2023.

source: tradingeconomics.com

The cuts in August and November 2024 were the first after seven consecutive pauses, which followed a run of 14 consecutive increase moving from 0.1% in early December 2021, a total change of 5.15% percentage points. It was cut to a record low of 0.1% at the start of the pandemic in 2020.

Date of announcement	Rate	Change
December 2024	4.75%	No change
November 2024	4.75%	-0.25 percentage points
September 2024	5%	No change
August 2024	5%	-0.25 percentage points
June 2024	5.25%	No change
May 2024	5.25%	No change
March 2024	5.25%	No change
February 2024	5.25%	No change
December 2023	5.25%	No change
November 2023	5.25%	No change
September 2023	5.25%	No change
August 2023	5.25%	+0.25 percentage points
June 2023	5%	+0.5 percentage points
May 2023	4.5%	+0.25 percentage points
March 2023	4.25%	+0.25 percentage points
February 2023	4%	+0.5 percentage points
December 2022	3.5%	+0.5 percentage points
November 2022	3%	+0.75 percentage points
September 2022	2.25%	+0.5 percentage points
August 2022	1.75%	+0.5 percentage points
June 2022	1.25%	+0.25 percentage points
May 2022	1%	+0.25 percentage points
March 2022	0.75%	+0.25 percentage points
February 2022	0.5%	+0.25 percentage points
December 2021	0.25%	+0.15 percentage points
March 2020	0.1%	-0.15 percentage points

Why the base rate changes

The driver for changing rates right now is inflation, which has been higher than wanted since late 2021.

Increasing interest rates is seen as the key (perhaps only) way to battle inflation, the idea being we’ll save more or have more expensive debts (like mortgages), leading to us spending less. This will force suppliers to lower prices, which in turn will see the inflation rate drop (though in most cases that doesn’t mean prices fall, they just get more expensive at a slower rate).

However, those rate hikes take time to filter down and for the inflation rate to – in theory – come under control. And if you keep increasing rates the danger is it pushes the economy into recession and cause hardship for borrowers, particularly those with mortgages.

Likewise if the Bank decides to cut the rate too early, it might not have done enough, leading to a reverse later on.

Will interest rates fall in 2025?

The first cut this year was expected in the spring, but didn’t happen, and kept getting pushed further back, eventually happening in August. Another was tipped for September, but didn’t happen until November. December looked likely for another cut until higher than expected inflation stopped that.

So we only ended up with two cuts this year rather than the four or five predicted back in January. And a few months ago there were predictions we’d get to 4.5% by now, and that the base rate could fall to as low as 2.75% in a year’s time – though that was at the extreme end of forecasts.

Now even a little above that’s looking unlikely. And in part that’s down to October’s Budget. In this month’s minutes, it’s noted there’s “significant uncertainty” about how the economy will react to the increased employer NI contributions. They also mention possible global issues with trade tariffs from the USA and other events worldwide.

This unpredictability with predictions isn’t anything new, and it shows how it’s always a guessing game ahead of each BoE meeting (and in between).

There wasn’t much in the minutes this time to help us understand where the Bank sees inflation or the base rate going next year. It does say that market expectation were for the rate to be around 3.75% to 4% in three years’ time.

So if we do see any changes next year it would suggest at most we’ll see four cuts, though two is more likely. This month and last the word “gradual” was used in respect to any future changes, so we shouldn’t expect lots of cuts early in the year.

And then when it hits that range, it’ll likely remain flat for a while.

Of course, as ever there’s uncertainty around what will happen – everything can change and none of this is guaranteed!

When is the next interest rate decision?

The rate is set every six weeks or so by the Bank of England Monetary Committee, a group of nine people, with the majority vote deciding whether the rate goes up, down or stays the same. The December 2024 decision was six who wanted it to stay at 4.75%, and three in favour of a 0.25% cut to 4.5%.

The next meetings will be on:

• 6 February 2025
• 20 March 2025
• 8 May 2025
• 19 June 2025
• 7 August 2025
• 18 September 2025
• 6 November 2025
• 18 December 2025

(full dates here).

Why it matters

The BoE rate is a large part of what high street and online banks and lenders use to inform the rates they offer. This means it will impact the cost of borrowing on things like mortgages, loans and credit cards, but also how much you can earn on savings.

Sometimes it’s a direct correlation if you have a product with a tracker rate – something that literally changes up or down in line with the BoE rate. In that case you’ll see an instant change.

On other products you might not see an instant change – if at all. So it pays to shop around to see if you can get a better deal.

How it impacts your savings

The increases in the base rate were good news for savers. We’ve been earning very poor levels of interest, but that started to change in late 2021, and got better and better.

But that’s been changing since rates peaked in the autumn of 2023. Since then rates have generally been falling as banks price in the predicted cuts (they’re fast to pass these on, but slow to give us the increases).

Many popular easy access savings accounts are now tracker rates, so are unlikely to change (though Chase has announced it’ll increase the tracker rate from 1.25% below to 1.5% below next February). And since others are variable, they’ll also probably stay around the same rate

However, the fact the rate was widely expect to not change this month, and to be slower in cuts in 2025 has actually seen a little movement upwards at the top of the fixed rate tables. So that could continue.

You can find the best paying options in our daily updated best buy tables.

How the base rate impacts your mortgage

The decision means existing tracker and variable rate deals will stay the same. And if you’re already on a fixed-rate mortgage (which most people are) nothing will change anyway – for the time being.

But for those looking to get a new deal soon, the freeze in the base rate this month will initially sound like frustrating news as it’s unlikely lenders will imminently reduce their mortgage rates.

Many longer term fixes will have priced in changes to the base rate on previous predictions, but if we’re expecting further cuts to take more time to come through, it could mean there’s not much movement downwards on new fixes for now.

It’s always worth speaking with a mortgage broker who can advise on different strategies – though since no one knows what will happen this still won’t guarantee any savings.

And anyone who is really struggling to make their repayments, it’s important to talk to your lender to see if anything can be worked out – though bear in mind missing payments can impact your credit report.

If it’s impacting other essential spending, then see whether those companies can support reduced repayments. And if debts have built up, speak to a debt charity.

How it impacts other borrowing

With this change to the base rate, you’re still unlikely to see much difference to the rates of your existing loans or new deals.

Regardless, makes sure you always try and go for 0% deals if you can get them, or to use your savings to pay for things or clear debts rather than take out new ones.