What is the current Bank of England base rate in 2026?

As of February 2026, the Bank of England base rate stands at 4.5%.

How often does the MPC meet to decide interest rates?

The Monetary Policy Committee (MPC) meets 8 times a year to decide on the base rate.

Is now a good time to fix my mortgage?

This depends on your risk appetite. Fixing provides certainty, but if rates fall faster than expected, a tracker might be cheaper. Currently, fixed rates are pricing in further cuts.

What is the SONIA rate?

SONIA (Sterling Overnight Index Average) is the risk-free rate for sterling markets, often replacing LIBOR, and tracks the base rate very closely.

How do interest rates affect savings?

Higher interest rates generally mean better returns on savings accounts, though banks are often slower to pass on rate hikes than cuts.

UK Interest Rates

Q: Will interest rates go down in 2026?

Yes, market forecasts suggest a cutting cycle continuing through 2026, with the base rate potentially falling to between 3.75% and 4.25% by the end of the year.

Q: How does the base rate affect my mortgage?

If you are on a variable or tracker mortgage, your rate will move directly with the base rate. Fixed-rate mortgages are priced based on swap rates which anticipate future base rate moves.

By Mustafa Bilgic | Published: Jan 1, 2025 | Updated: Feb 20, 2026

The UK financial landscape in 2026 continues to be dominated by the trajectory of the Bank of England (BoE) base rate. As of February 2026, the current base rate stands at 4.5%. This rate is a critical lever used by the Monetary Policy Committee (MPC) to manage inflation and stabilize the economy. Understanding the movements of this rate is essential for homeowners, savers, and investors alike.

Following the tumultuous economic conditions of the early 2020s, 2026 marks a period of cautious optimism, with a clear trend toward monetary easing. This guide explores the historical context leading up to today's rate, forecasts for the remainder of the year, and practical tools to help you understand how these changes impact your personal finances.

Current Status: February 2026

At the most recent meeting, the MPC voted to hold the base rate at 4.5%, though market sentiment strongly indicates that further cuts are on the horizon. This represents a significant shift from the peak rates seen in 2023. The "cutting cycle" which began tentatively in late 2024 has gained momentum, providing relief to mortgage holders coming off fixed-term deals.

Historical Rate Changes (2021–2026)

To understand where we are today, it is vital to look at the volatility of the last five years. The journey from near-zero interest rates to the 15-year highs of 2023 has been one of the most rapid tightening cycles in history.

Year	Rate Trend	Key Events
2021	0.1% (Historic Low)	Post-pandemic stimulus remained in place. Inflation began to creep up late in the year.
2022	Rising to 3.5%	Rapid hikes to combat soaring inflation driven by energy prices and supply chain shocks.
2023	Peak 5.25%	Rates peaked to squeeze inflation out of the system. Mortgage pain was felt acutely.
2024	Stabilization & First Cuts	Inflation returned to target. The BoE signaled the end of hikes and began a slow cutting cycle.
2025	Falling to 4.75%	Consistent, albeit slow, reductions as the economy stabilized.
2026	Current: 4.5%	The cutting cycle continues, with forecasts targeting sub-4% rates by year-end.

The Monetary Policy Committee (MPC)

The base rate is decided by the MPC, which meets 8 times a year (roughly every 6 weeks). Their remit is to keep inflation close to the government's 2% target. In 2026, the MPC's focus has shifted from fighting high inflation to supporting economic growth without reigniting price rises.

The minutes of these meetings are scrutinized by analysts for "hawkish" (favoring higher rates) or "dovish" (favoring lower rates) language. Currently, the committee leans dovish, acknowledging that the restrictive rates of 2023/24 have done their job.

Impact on Mortgages

The most direct impact of the base rate is on mortgage borrowers. Approximately 30% of UK households have a mortgage, and millions remortgage every year.

Standard Variable Rates (SVR) and Trackers

If you are on a Tracker mortgage, your rate tracks the BoE base rate plus a set percentage. For these borrowers, the 2026 cuts provide immediate relief. Every 0.25% cut translates instantly to lower monthly payments.

SVRs are set by lenders individually but usually follow the base rate trend. However, lenders are often slower to pass on cuts to SVRs than they are to Trackers.

Interactive Mortgage Rate Change Calculator

Use the tool below to estimate how a base rate cut (typically 0.25%) affects your monthly payments.

📉 Mortgage Cut Calculator

Outstanding Mortgage Balance (£) Remaining Term (Years) Current Interest Rate (%)

Fixed Rate Mortgages

Fixed-rate mortgages do not change immediately when the base rate changes. Instead, they are priced based on "Swap Rates"—the market's prediction of future interest rates. Interestingly, throughout late 2025 and early 2026, fixed rates have often been lower than the base rate because the market anticipates further cuts. A 2-year or 5-year fix taken out today already "prices in" the expectation that the base rate will drop to around 3.75-4.0%.

Impact on Savings and Investments

For savers, the cutting cycle is less welcome news. The golden era of easy 5%+ returns on instant access accounts is fading. As the base rate falls to 4.5% and potentially lower, banks are reducing the interest paid on savings accounts.

However, real returns (interest rate minus inflation) remain positive for the first time in years, as inflation is currently stable around 2%. Savers are advised to shop around or consider locking in fixed-term bonds before rates drop further.

SONIA and Credit Products

Many modern financial products are linked to SONIA (Sterling Overnight Index Average), which has effectively replaced LIBOR. SONIA tracks the base rate incredibly closely. This affects commercial loans, car finance, and complex derivatives. For consumers, credit card APRs and personal loan rates are indirectly affected; while they don't track the base rate perfectly, the cost of funding for banks decreases as the rate is cut, which should eventually soften borrowing costs for consumers.

Market Forecast 2026

What does the rest of 2026 hold? Financial markets and economists generally agree on the direction of travel, if not the exact speed.

Consensus Forecast: The base rate is expected to end 2026 between 3.75% and 4.25%.
Upside Risks: If inflation spikes again (due to geopolitical instability or energy shocks), the BoE may pause cuts.
Downside Risks: If the UK economy enters a recession, the BoE may cut rates faster and deeper to stimulate growth.

Decision Guide: Fixed vs Tracker in 2026

The perennial question for borrowers: Should you fix or track?

Argument for Fixing: Certainty. With rates around 4.5%, fixing gives you a guaranteed payment. If you believe inflation might return or that the market is too optimistic about cuts, fixing is safe.

Argument for Tracking: If the base rate falls to 3.75% by year-end, a tracker mortgage taken out now (typically Base + 0.5%) would become cheaper month by month. You benefit immediately from every decision the MPC makes to cut rates. However, your payments could rise if the economic wind changes.

Frequently Asked Questions

1. What is the current Bank of England base rate?

As of February 2026, the rate is 4.5%.

2. Will interest rates go down in 2026?

Yes, the general consensus is that rates will continue to fall slowly throughout 2026, potentially reaching 3.75% - 4.25% by the end of the year.

3. How often does the MPC meet?

The Monetary Policy Committee meets 8 times a year to vote on the interest rate.

4. How does the base rate affect my mortgage payments?

Directly if you are on a Variable or Tracker rate. Indirectly if you are looking for a new Fixed rate, as swap rates adjust based on future expectations of the base rate.

5. Should I lock in a fixed rate now?

If you prioritize budgeting certainty, yes. However, if you believe rates will fall significantly, a tracker might be cheaper in the long run.

6. What is the 'real' interest rate?

The real interest rate is the base rate minus inflation. With inflation around 2% and rates at 4.5%, savers are finally getting a positive real return.

7. What is SONIA?

SONIA (Sterling Overnight Index Average) is the benchmark risk-free rate used in financial markets, tracking the Bank of England base rate very closely.

Disclaimer: This article provides general information and does not constitute financial advice. Always consult a qualified mortgage broker or financial advisor before making significant financial decisions.