Bank of England Holds Base Rate at 4.25% — What It Means for Your Mortgage

Quick answer

The Bank of England's Monetary Policy Committee voted at its May 2026 meeting to hold the Bank Rate at 4.25%. The decision was a split — the majority voted to hold, citing services-inflation persistence; a minority voted for an immediate 25 basis-point cut.

For most UK borrowers and savers, nothing changes today:

• Fixed-rate mortgage: unchanged until your fixed period ends.
• Tracker: unchanged until next BoE move.
• SVR: lenders typically don't adjust SVR within a "hold" cycle.
• Variable savings: rates won't move materially.

What has shifted is the market expectation for cuts in H2 2026.

What the MPC actually said

The accompanying statement repeated the formula the MPC has used through 2025–26: any further easing will be "careful and gradual". Two specific phrases caught analysts' attention:

1. The statement explicitly mentioned services inflation continuing to be more persistent than goods inflation, which the MPC sees as the principal reason not to cut yet.
2. The committee noted modest second-round wage effects from public-sector pay awards, which it judges as creating "ongoing inflation persistence".

The Quarterly Monetary Policy Report (also published today) suggests the MPC expects headline CPI to be at the 2% target sometime in the second half of 2027 — a slower path than the February report implied.

What it means for mortgages

If you're on a tracker

Your rate is whatever you negotiated above the base rate. A "Base + 0.5%" tracker today is at 4.75%. No change this month. The next move depends on the August or September MPC decisions.

If you're on SVR

Standard Variable Rates are set by individual lenders and don't move automatically with the BoE. Most lenders' SVRs are still 7–9%. If you're on SVR you should be remortgaging — this hold doesn't change that conclusion.

If you're on a fix

No change until your fix ends. But the cost of remortgaging today has barely moved on this decision:

Most of the rate fall already happened in March and April as markets priced in expected cuts. Today's hold prevented further falls, but didn't reverse the trend.

Worked example — £200k mortgage, 25-year repayment

Remortgaging from a 2023 fix today still saves roughly £160/month on a £200k mortgage. Waiting another few months hoping for a further fall is plausible — but if your fix ends in the next 60 days, you're better off securing now.

What it means for savings

• Easy-access cash: best rates 4.0–4.2% AER. No major move today.
• 1-year fix: best 4.5–4.7%. Marginal upward pressure today as the cut-priced expectation fades.
• 5-year fix: best 4.3–4.5% — interesting territory as fixed-savings rates moved up on today's hold (because future BoE cuts are now further away).
• Premium Bonds: prize fund rate unchanged at 4.0%.

For basic-rate taxpayers with sizeable cash savings, the £1,000 Personal Savings Allowance is rapidly used up at these rates — making a Cash ISA the obvious destination. See our ISA deadline checklist for the mechanics.

What it means for first-time buyers

Mortgage stress tests are calculated off lender-specific notional rates rather than the BoE base rate directly. A typical 90% LTV stress test sits around 8.5–9% — unchanged on today's announcement.

Affordability has improved slightly versus 12 months ago because:

• Mortgage product rates are lower (~4.5% vs ~5.5% one year ago).
• Wage growth has continued.
• But house prices have been broadly flat in the same period — so the "real" cost of buying has dropped marginally.

The market reaction

In the two hours after the decision:

• 2-year gilt yield: +5bp to 4.05%
• 5-year gilt yield: +3bp to 4.10%
• Sterling vs USD: +0.4% to 1.27
• FTSE 100: -0.2%

In English: markets had partly priced in a cut, were surprised by the hold + hawkish statement, and recalibrated. Swap rates (the wholesale market that drives fixed mortgage pricing) ticked up slightly today — which is why we wouldn't be surprised if some lenders nudge 5-year fixed rates up by 0.05–0.10% in the next 2 weeks.

What's next

The MPC meets again at the end of June. Pricing for that meeting at the time of writing is:

• Hold at 4.25%: ~70% probability
• Cut to 4.00%: ~30% probability

The August meeting (with a fresh Monetary Policy Report) is when most analysts now expect the next cut, if there is one this year.

Sources

• Bank of England: Monetary Policy Committee — May 2026 statement
• Bank of England: Monetary Policy Report — May 2026
• ONS: Consumer price inflation
• Moneyfacts: 5-year fix LTV historical pricing