Bank of England Holds Base Rate at 3.75%
The Bank of England’s Monetary Policy Committee (MPC) has confirmed that the base rate will remain at 3.75% following its first meeting of 2026 on the 5th of February. The vote was a 5–4 split, with four members favouring a 0.25% cut - underscoring how finely balanced the economic outlook has become.
This marks the first rate decision of the year and continues the holding pattern set after several cuts throughout 2025. Inflation, though easing overall, ticked up to 3.4% in December 2025, which remains above the Bank’s 2% target. As a result, policymakers have opted for caution before making any further moves.
Why Has the Bank Held Rates?
Several key factors influenced the MPC’s decision:
1. Inflation Still Above Target
Consumer Price Index (CPI) inflation rose unexpectedly from 3.2% to 3.4% in December, driven by travel demand and higher duties. This stubbornness is why the Bank has kept policy tight—for now. [express.co.uk]
2. Wage Growth Remains Elevated
Sticky wage increases pose a risk of prolonging inflation, making the MPC hesitant to cut prematurely. [sapeople.com]
3. Economic Signals Are Mixed
Early 2026 data shows stronger-than-expected demand but also a fragile labour market. Economists expect rate cuts later in the spring (most likely around April) if inflation falls as projected.
What This Means for Your Money
Mortgage Borrowers
For tracker & variable rate borrowers on base‑rate‑linked mortgages, there will be no immediate change to monthly payments since the base rate remains at 3.75%.
For fixed‑rate borrowers, current fixed deals stay unchanged, but the market reaction matters with some lenders increasing rates slightly in recent weeks due to rising funding costs. With the Bank signalling cuts later in the year, fixed-rate pricing may stabilise or improve as swap rates adjust.
Savers
Higher rates have previously benefited savers, but cuts in 2025 already softened returns:
Average easy‑access savings fell from 3.06% to 2.60% over the year.
Many providers have already trimmed rates regardless of today’s hold.
Shop around. Even with rate cuts likely this year, competitive accounts still exist—particularly in the 4%+ range.
Homebuyers & Remortgagers
Buyer confidence remains muted due to affordability pressures, but this could improve later in the year with expectations of rate cuts.
Looking Ahead: Are Rate Cuts Coming?
Most economists expect the first cut of 2026 between March and April, assuming inflation falls back toward 2% as anticipated. After that, markets currently price in one or two additional 0.25% cuts later in the year, potentially bringing the rate down to 3.25%–3.5% by year‑end.
The next MPC announcement is scheduled for 19 March 2026, and the vote split from this week suggests a cut is increasingly plausible.
This article is for general information and does not constitute personal financial advice. If you’re unsure what’s best for you, seek independent financial advice.
