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 5.25%.

On 20 June 2024, the Bank of England maintained the base rate at 5.25%. It has remained at this level since August 2023.

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.

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. Although since August 2023 they have maintained it at the same level of 5.25%.

When is the next Bank of England base rate meeting?

The next meeting of the Bank of England's MPC to decide on a change to the base rate is 1 August 2024.

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.

This may be due to some signs that inflation was falling, which led to some expectations that the base rate may fall sooner than expected. Lender competition also likely caused rate reductions, as banks and building societies repriced their deals to attract more customers.

Rates have increased slightly in the past couple of months after the most recent base rate announcement. This is despite the inflation rate being at its lowest level in over two years. The mortgage rate rises have largely been due to swap rate increases, which some suspect are due to inflation not falling as much as was hoped.

Will mortgage rates go down in 2024?

Mortgage rates fell towards the end of 2023 and start of 2024, but we’ve seen increases in recent months. This volatility means that it’s hard to say for certain whether rates will go down in 2024 as it’s very difficult to predict what’ll happen next in the market.

We can say that the base rate has remained static at 5.25% since August 2023. And inflation has now dropped to 2% for the first time in almost 3 years - 2% is the Bank of England's inflation target.

But Andrew Bailey also indicated that they're waiting for clear signs that inflation is easing when deciding whether interest rates can be cut. He said they would look at the following following factors to help them assess this:

• Services prices
• Pay rises
• Quantities in the labour market

Some economists predict a base rate reduction this year. But it's impossible to say for sure. And given the volatility we've seen in recent months despite the base rate remaining the same, it's also tricky to know exactly what would happen to fixed mortgage rates if the base rate was to fall.

What our mortgage expert says:

"Despite the base rate remaining the same since August, mortgage rates have been very volatile in recent months. Several lenders have increased rates on selected products in the last few weeks due to rising swap rates.

"For those who are due to remortgage soon, the average standard variable rate remains higher than the average fixed rate deal on the market. This means waiting for rates to fall before you remortgage could be an expensive strategy.

"Whether you’re purchasing a new property or remortgaging your existing one, it’s worth doing some research and consulting an expert to find out what mortgage options may be available to you."

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).