The Bank of England (BoE) has announced it will hold interest rates at their current level of 3.75% in its first base rate vote of the year.

The central bank’s latest decision, widely expected by economists, will keep rates at their lowest level since February 2023.

At its meeting this week, the nine members on the BoE’s Monetary Policy Committee (MPC) voted by a majority of five to four to maintain the base rate, with four members in favour of a 0.25% cut that would have taken rates down to 3.5%.

According to the BoE’s report published today, the MPC is expecting inflation, which currently sits at 3.4%, to fall back to the 2% target from April, owing to “developments in energy prices including from Budget 2025”, it said.

Governor of the BoE, Andrew Bailey, said: “We now think that inflation will fall back to around 2% by the spring. That’s good news. We need to make sure that inflation stays there, so we’ve held rates unchanged at 3.75% today.

“All going well, there should be scope for some further reduction in bank rate this year”.

The final vote of 2025 had seen the BoE announce a 0.25% cut to rates in December, the sixth time the central bank had cut interest rates since it started its cutting cycle in August 2025 from a peak of 5.25%.

In the mortgage sector, the latest decision to hold the base rate will mean that homeowners on a tracker mortgage will see no change to their monthly payments.

Chief commercial officer at Fleet Mortgages, Steve Cox, commented: “With a cut already delivered in December, and the Bank keen to avoid moving too quickly, this pause was widely expected.

“That said, the broader expectation is still for inflation to fall through the year, which could pave the way for two or possibly three cuts to bank base rate during 2026, potentially taking us down to 3% by the end of the year.”

On the prospect of more rate cuts in 2026, chief distribution officer at LSL Financial Services, Emma Hollingworth, said: “For borrowers, this means mortgage rates are unlikely to move much lower – if at all – in the near term. In fact, recent increases in swap rates have caused some lenders to put up their mortgage rates.

“That said, competition remains strong and pricing remains relatively attractive, which is good news for the estimated 1.8 million borrowers rolling off fixed rate mortgages in 2026.”

However, director of second charge mortgages at Pepper Money, Ryan McGrath, added: “Anyone coming to the end of a fixed term deal is still looking at a sharp jump in payments compared to the rates they secured five years ago.

“In that context, a full remortgage remains an unappealing, and often expensive, move for many.

“This is where second charge mortgages continue to prove their worth. Instead of disturbing a low-interest first charge mortgage just to raise capital or consolidate debt, homeowners can use a second charge to access equity. It’s a practical way to manage finances efficiently without exposing the entire mortgage balance to today’s higher rates.”

The BoE will announce its next vote on the base rate on 19 March.

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