Bank of England base rate

The base rate of interest is used by the Bank of England to help manage inflation. This guide explains what the base rate is currently and how it impacts mortgage rates.

What is the current base rate?

The current base rate is 4.75%.

On 19 December 2024, the Bank of England held the base rate steady at 4.75%. In November, it was the second time the base rate had been reduced since March 2020, when it was cut to 0.1% at the start of the Covid-19 pandemic. 

From December 2021 to August 2023, the Bank of England raised the base rate 14 times in a row in order to address rising inflation. It reached a peak of 5.25% in August 2023, and was held there until 1 August 2024. 

What is the Bank of England base rate?

The Bank of England base rate is the base rate of interest. It's a mechanism to allow the Bank of England to manage the economy and control inflation.

Also known as Bank Rate, it influences the rates of interest banks charge to people when they borrow money. It also impacts rates on savings accounts.

The base rate is set by the Bank of England's Monetary Policy Committee (MPC).

How does a base rate change affect your mortgage?

If the base rate changes, the impact on your mortgage rate depends on the type of mortgage you have.

If you have a tracker mortgage with a rate set at a fixed amount above the base rate, you normally see an immediate impact on your mortgage rate following a base rate change.

If the base rate rises by 0.5 percentage points, so does your mortgage rate. If it falls, your rate does too.

If you have a standard variable rate (SVR) or discount mortgage (which usually has a rate at a set amount below the SVR), your rate may be impacted by a change in the base rate.

The SVR is set by the lender but is often influenced by the base rate.

If you have a fixed-rate mortgage, you won't face a change in your rate while your deal is ongoing.

But changes in the base rate can affect the rates of fixed deals available in the market. This might mean the rates available to you when you remortgage are different compared to when you got your current deal.

Why does the Bank of England base rate change?

The base rate is changed by the Bank of England to manage the economy and control inflation.

When the base rate rises, normally so do interest rates. The intention of this is to encourage people to save more and spend less, helping to reduce inflation.

When the base rate reduces, interest rates fall. The aim here is to encourage people to spend more to stimulate the economy.

For example, during Covid-19, the base rate was reduced to 0.1%. This was to help businesses borrow more to get them through the pandemic.

But from the end of 2021, rising inflation saw the Bank of England increase the base rate 14 times in a row.

When is the next Bank of England base rate meeting?

The next meeting of the Bank of England's MPC to decide on whether to change the base rate is 6 February 2025.

The MPC meets 8 times a year, normally around every 6 weeks. Although they can meet more than this if needed.

Bank of England base rate and mortgage rates over the past year

Here are all the base rate announcements from the past year, alongside what the average fixed mortgage rate was at the time.

Over the last six months, the average fixed rate has actually dropped below the base rate due to several mortgage lenders reducing rates on their fixed-rate deals.

There has also been a lot of volatility in the average fixed rate over the past year, despite the base rate being held at 5.25% for much of it.  

Will mortgage rates go down in 2024?

Mortgage rates fell towards the end of 2023 and start of 2024, with some increases in the spring months. There have been reductions more recently though.

With the base rate at 4.75%, we may not see any impact on fixed mortgage rates, unless swap rates fall as a result. 

However, there was lots of volatility in mortgage rates over the past year despite the base rate remaining relatively stables. It makes it difficult to predict exactly what will happen to mortgage rates in the next few months. 

If the base rate falls in early 2025, we may see some lower fixed rate deals appear on the market. 

Those on tracker mortgages will likely see their rate fall in line with the base rate.

What our mortgage expert says:

"After months of holding the base rate at 5.25%, the Bank of England has confirmed their decision to reduce it. Those on tracker mortgage deals will likely be pleased as this should mean they benefit from lower repayments almost immediately.

"Some may also hope this results in cheaper fixed-rate deals becoming available. However, fixed mortgage rates have generally remained quite volatile despite the base rate remaining the same since last August, which makes it difficult to predict what will happen to these deals.

"For those who need a new mortgage in the near future, whether for a new property or an existing one, consider speaking to an expert who can explain all your options in this fast-changing market."

Claire Flynn Mortgage expert

How to get the best mortgage deal

The best mortgage deal depends on your personal circumstances. But there are things you can do which may help improve your chances of getting a cheaper mortgage deal:

• Put down a larger deposit if you can afford to, as a larger deposit means a bigger loan to value (LTV) ratio, which usually means better rates
• Check that you have as little debt as possible and reduce overall spend on non-essential outgoings
• Make sure all credit card and other payments are made on time
• Check that you’re on the electoral register and review your credit report for any mistakes
• Use a whole-of-market mortgage broker, who can look at deals from lots of different lenders to find the best one for you

Ultimately, there are lots of different factors that affect what rates and deals you have access to. If you’re ready to secure your next mortgage deal, speak to our whole-of-market experts at Mojo Mortgages.

*All mortgage rates are based on Mojo Mortgages data of fixed-rate mortgages available at the time from 5 of the biggest lenders (HSBC, Santander, Nationwide, Natwest and Halifax).

Share this article