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Bank of England base rate

We explain what the Bank of England base rate is and how it affects the cost of your mortgage to help you avoid paying more than you need to.

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Bank of England base rate

What is the current base rate?

The current BoE (Bank of England) base interest rate is 5.25%, after the Monetary Policy Committee took the decision to maintain the current rate on 9 May 2024. This is the longest period of stability in over a year.

When is the Bank of England base rate's next review?

The Bank of England next meet on 20 June 2024 to make a decision on the base rate. They meet every six weeks, but in times of crisis may meet more frequently - with the Coronavirus pandemic being a good example of this.

It was cut twice in March 2020 to ease the economic pressure caused by the coronavirus pandemic – from 0.75% to 0.25% on 11 March and to 0.1% just eight days later on 19 March.

What is the Bank of England base rate?

The base rate is an interest rate set by the Bank of England (BoE). It’s the amount the Bank of England charges UK banks to borrow money.

The amount UK banks charge their customers to borrow money is often influenced by the base rate. As a mortgage is a form of borrowing money, any change in the Bank of England base rate has the potential to affect your mortgage interest rate.

How you’re affected will depend on the type of mortgage deal you have.

How do changes in the base rate affect tracker-rate mortgages?

If you have a tracker mortgage, the rate is usually directly linked to the BoE base rate. So if the base rate increases or decreases, your mortgage rate will change by the same amount. So, for example, after an increase of 0.5%, the average monthly repayment for a £200,000 loan will cost £57 extra.

How do changes in the base rate affect fixed-rate mortgages?

Your payments won’t be affected if you have a fixed-rate mortgage until your fixed period ends. However, once your fixed-rate deal ends, you’ll be moved onto your lender’s standard variable rate (SVR), which is likely to be higher.

It’s usually a good idea to look into new deals within the last six months of your existing deal - to avoid paying interest at a higher rate. However, base rate increases could mean the best mortgage deals available are more expensive than the last time you got a mortgage. Each lender sets their own fixed-rate mortgage deals, and not all lenders will interpret market rates and adjust their fixed-rates in the same way. This means it's always worth looking at what's available, especially compared to the SVR.

How do changes in the base rate affect SVR and discount-rate mortgages?

If you’re on an SVR, or a discount rate mortgage set on your lender’s SVR, normally base rate changes influence your rate, although don't directly affect it. SVRs are usually set preemptively of expected market fluctuations, meaning they've often already risen before the base rate is announced.

Should I fix my mortgage rate now?

If you’re within the last six months of any type of mortgage deal at the moment, it’s absolutely worth speaking to a broker to look at the potential fixed-rate options available. It’s possible to lock in a deal with most lenders up to six months before your existing deal ends, and you're not tied to this rate until it does.

Whilst certainly not as attractive as they’ve been in recent years, at the current time, both two and five-year fixes are likely to be cheaper than staying on your lender’s SVR.

Those coming out of previous two, three and five year fixed-rate deals that were fixed when interest rates were much lower across the board, will almost certainly see a rise in the rates available to them when remortgaging.

UK interest rates

You might have heard the Bank of England base rate referred to as the UK interest rate.

Banks will often set their own interest rates based on the current UK interest rate (base rate). How the rate impacts you will depend on whether you’re borrowing or saving money with your bank.

If you’re borrowing money through a mortgage or loan, your bank will charge you interest for borrowing that money. The interest rate is what is used to calculate the actual amount you’ll be charged. It’s a percentage of the total amount borrowed.

For example you might borrow £100. If the bank’s annual interest rate is 1%, you’ll pay £1 in interest over a year.

An increase in the current base rate is normally a bad thing if you’re borrowing money as your bank is likely to charge you a higher rate of interest, meaning you pay more.

When you save money, the bank will pay interest to you. That’s because, when you save, you’re handing your money over to the bank. This means you’re effectively lending the money to it so it needs to pay you interest for borrowing the money from you.

If you’re saving money, a rise in the UK interest rate is likely to benefit you as you’ll be earning more from the higher interest rate.

When does the base rate change?

The Bank of England meet every six weeks to decide whether or not the base rate should change. The base rate does not necessarily change every time they meet, however. Interest rates were on hold at 0.1% from March 2020 to December 2021 before they started rising again.

The Bank of England raises and lowers its interest rate to help influence the UK economy. If the Bank of England makes the decision to raise interest rates, it encourages people to save more as they will get a higher interest rate on their money and the cost of borrowing will rise. 

Lowering the interest rate has the opposite effect, encouraging people to spend more, but this can lead to inflation. Inflation is the rate at which the prices of goods and services increase. A high inflation rate means we end up paying more for the things we spend our money on than previously.

Because of the effect a change in the base rate can have on people’s spending habits, the base rate is a key part of maintaining a stable economy.

Bank of England base rate history

Historically, interest rates have remained relatively stable throughout UK history since the Bank of England was founded in 1694 but certain periods in base rate history stand out:

  • UK record of interest rate stability (April 1719 - June 1822) - from April 1719 to June 1822, the base rate remained at 5% before going down to 4%. That’s over 100 years of stability

  • Highest ever interest rate (November 1979) - the base rate hit its highest peak ever at 17%. It remained at 17% until 3 July 1980

  • Lowest ever interest rate (March 2020) - the base rate dropped to a historic low of 0.1% on 19 March 2020 where it stayed until December 2021

Bank of England base rate changes since 1975

Source: Bank of England

YOUR HOME/PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.

The FCA does not regulate mortgages on commercial or investment buy-to-let properties.

Uswitch makes introductions to Mojo Mortgages to provide mortgage solutions. Uswitch and Mojo Mortgages are part of the same group of companies. Uswitch Limited is authorised and regulated by the Financial Conduct Authority (FCA) under firm reference number 312850. You can check this on the Financial Services Register by visiting the FCA website. Uswitch Limited is registered in England and Wales (Company No 03612689) The Cooperage, 5 Copper Row, London SE1 2LH. Mojo Mortgages is a trading style of Life's Great Limited which is registered in England and Wales (06246376). Mojo are authorised and regulated by the Financial Conduct Authority and are on the Financial Services Register (478215) Mojo’s registered office is The Cooperage, 5 Copper Row, London, SE1 2LH. To contact Mojo by phone, please call 0333 123 0012.