Having been cut four times last year, the first review of the base rate for 2026 has resulted in it being kept at 3.75%. The last base rate cut of 2025 was in December and it took the rate to the lowest it had been since January 2023.
Why has the base rate remained the same?
Despite the cut to the base rate in December, inflation jumped higher than expected to 3.4%. Timing issues that led to the increase mean that this rise is thought to be temporary. However, it’s still significantly higher than the Bank of England’s target inflation rate of 2% and it has remained sticky. Wage growth has also remained higher. These factors have contributed to the base rate decision made by the Monetary Policy Committee to keep it at its current level.
When will interest rates come down?
Interest rate cuts are expected in 2026 but economists’ opinions are divided as to when this will happen and how frequently. Some predict the first rate cut will happen in March, while others think it will be held longer until April. Some economists are predicting one or two further cuts later in the year, while others anticipate that there will only be one cut this year.
How will mortgages be affected by this base rate decision?
Tracker mortgages typically track the base rate, which means that if you have this type of mortgage, your interest rate will remain unchanged and your payments will stay the same. Discount mortgages and standard variable rate (SVR) mortgages can be influenced by the base rate but are not determined by it. Lenders set their own SVRs, which are usually based on market predictions so it’s unlikely that your rate will change.
For fixed rate mortgages, the rate you pay remains the same until the end of your fixed period. If this period is coming to an end, it’s recommended to lock in a new deal to avoid being switched over to your lender’s SVR.
You can lock in a new deal up to 6 months before the end of your fixed term. You’re not tied to the new deal, though, until your current one ends. This means that you can review the deals available and if you find a better one, you can lock that in place instead. This gives you peace of mind that if rates go down, you can secure another new deal with a better rate.
Discover your mortgage options
To find the best deals available for your circumstances and preferences, get in touch with us on 01322 907 000. Our mortgage brokers have access to deals across the market, including exclusive broker-only deals, enabling them to find the best rates and terms for you. With a tailored service, you can look forward to the right solution for your mortgage needs.