Interest base rate stays at 3.75%: what does it mean for you?

Increasing inflation due to the war in Iran could lead to rate increases this year

We’ve taken a look at the thinking behind this latest decision, and whether we’re likely to see any changes in 2026 – whether a cut or an increase.

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What is the current 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 18 June 2026, remaining at 3.75%. The decision was seven in favour of no change, and two votes for a increase to 4%.

It means the base rate remains close to it’s lowest rate in three and a half years. It sat at 3.5% in December 2022, before rising to 4% in February 2023.

Will interest rates rise or fall in 2026?

The reason behind the base rate increases over recent years was to bring down high inflation (we’ve explained this in more detail below). As inflation fell closer to the Bank’s target of 2%, so did the base rate.

We had four cuts to the base rate last year, a drop from 4.75% to 3.75%, and at the start of March it was almost certain we’d see the first cut of 2026 that month, and another later in the year down to 3.25%.

But then the conflict in the Middle East began, and that has pushed oil prices up, meaning higher fuel and energy costs are here and set to continue. That has already driven inflation rates up.

And those higher fuel costs will drive higher prices on everything from food to travel , which in turn will also impact inflation. The question is for how long and by how much? Though a peace deal has been signed, we’ll have to wait to see if that lasts.

The latest thinking is inflation won’t be as bad as some feared. The latest inflation rate of 2.8% was below expectation, and oil prices are already way down from their recent highs. Inflation is still expected to rise this year, perhaps to 3.25% in Q4.

Markets are now pricing in one base rate increase at the end of 2026 and no change for the first half of 2027 – that’s fewer and later than just last week. The BoE minutes note that some markets are forecasting no change at all for the next year.

But remember, this is all speculation and with continuing uncertainty in the world, things can change either way.

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When is the next interest rate decision?

The rate is set every six weeks or so by the Bank of England Monetary Policy Committee, a group of nine people, with the majority vote deciding whether the rate goes up, down or stays the same.

The next meetings this year will be on:

• 30 July 2026
• 17 September 2026
• 5 November 2026
• 17 December 2026

(full dates here).

The base rate and inflation

The driver for changing the base rate right now is inflation, which has been higher than wanted most of the time 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.

How the base rate impacts your money

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.

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How the decision impacts your savings

Since a peak in autumn 2023, rates have generally been falling as banks price in both actual and predicted cuts (they’re fast to pass these on, but slow to give us the increases).

With this decision there will be no immediate change to easy access accounts. However that doesn’t mean banks won’t make changes (up or down), so keep an eye on your accounts, and compare them to our best buy tables to make sure you’re getting a decent rate.

However, as markets are now pricing in fewer, if any increases to the base rate this year and next, some of the fixed rate increases we’ve seen in the last month could well disappear soon. So if you don’t need cash for between one and five years, you might want to lock in now before they go.

The highest-paying savings accounts – our picks

• 6% AER current account from Santander (limited to £4,000 deposit and has monthly fee)
• 7% AER regular saver from First Direct
• 4.55% AER easy access “Home Saver” from Tembo
• 4.51% AER easy access Cash ISA from Trading 212

Read more about these and the other best savings accounts in our best buys guide

The best savings accounts

Check out our list of the highest paying regular, easy-access, fixed and ethical savings accounts

How the decision impacts your mortgage

So no change to the base rate means no change to your mortgage, right? Not quite.

While tracker and standard variable rate (SVR) mortgages rates are directly based on the base rate, on the whole they’re actually influenced by something known as swap rates – effectively where lenders think the rate will be in the future.

In part, that’s why we saw rates drop from major lenders earlier in the year. They anticipated a reduction at some point, and reduced rates to reflect this.

But since the war on Iran, swap rates priced in hikes as a result of inflation predictions, and as a result, rates for new mortgages increased. At the start of the war in Iran, a two year fix was averaging at 4.83%, according to Moneyfacts. It’s now at 5.59%, though that’s down from a recent 5.9% peak.

However, big lenders Nationwide and Santander have made cuts in the last few days, and more could well follow following today’s meeting.

If you’re due to buy or remortgage 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 for 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.

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How the base rate has changed

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