Key takeaways:
- The Bank of England has held the Base Rate at 3.75% on 17th September.
- This marks the sixth consecutive Base Rate hold of 2026.
- The Monetary Policy Committee (MPC) voted 6-3 in favour of holding the Base Rate at 3.75% today.
- The latest CPI data showed a 0.2% increase to inflation which rose to 3.1% in August, up from 2.9% in July.
- The ongoing conflict in the Middle East has contributed to higher and more volatile energy prices, adding to inflationary pressures.
- The next MPC meeting will be held on Thursday 5th November.
Why has the MPC decided to hold the Base Rate?
The Monetary Policy Committee (MPC) voted 6-3 in favour of holding the Base Rate today, leaving it unchanged at 3.75% and marking the Bank’s sixth consecutive Base Rate hold of 2026. While the decision means there is no immediate change to interest rates, the hold demonstrates the Bank’s continued ‘wait and see’ approach as it continues to weigh the risk of future price increases.
The latest Consumer Price Index (CPI) data, released on 16th September, showed that inflation rose to 3.1% in August, which is a 0.2% increase from 2.9% in July. This increase highlights that inflationary pressures remain persistent, particularly as higher energy costs continue to feed through to household and business costs.
The ongoing conflict in the Middle East is another important consideration. Higher and more volatile global energy prices have already contributed to increases in UK fuel and household energy costs, while the Bank has warned that a prolonged period of higher energy prices could create wider inflationary pressures as businesses pass higher costs through to consumers.
Alongside inflation and energy prices, the MPC will also be monitoring the UK’s changing political and economic landscape ahead of the Autumn Budget on 28th October, the first Budget under Chancellor of the Exchequer John Healey. The Chancellor confirmed the Budget date in July and said it would be focused on fiscal discipline and providing greater stability for businesses and families.
The decision also comes against a backdrop of increased uncertainty around the future direction of interest rates. At the Bank’s previous meeting in July, three MPC members voted for a 0.25 percentage point increase to 4%, highlighting the divide within the Committee over how much further action may be needed to control inflation.
Today’s meeting resulted in the same 6-3 split, with three members again voting for a 0.25 percentage point increase to 4%. While the majority of the MPC continues to support holding the Base Rate at 3.75%, the repeated votes for a higher rate show that further increases remain a possibility if inflationary pressures persist.
The Governor of the Bank of England, Andrew Bailey, has also warned that prolonged volatility in energy prices could increase the need for higher interest rates:
“The longer this volatility persists, the bigger the impact it will have on inflation, and the more likely it is we will need to raise Bank Rate to ensure that inflation falls back to our 2% target.”
This view is also reflected in comments from, Victoria Scholar, Head of Investment at the financial platform Interactive Investor, who previously stated:
“The Bank is likely to carry out roughly one 25 basis point hike by the end of the year as it looks to temper the risk of overheating and help push the inflation rate back in the direction of its 2% target.”
While these comments point to the possibility of a further rate increase before the end of 2026, there is no certainty that this will happen. The direction of interest rates will continue to depend on how inflation, energy prices, wage growth and the wider economy develop over the coming months.
How could the Base Rate hold affect my mortgage?
The impact of today’s Base Rate decision will depend on the type of mortgage you have. While a hold means there is no immediate change to mortgages directly linked to the Base Rate, fixed mortgage rates can still move as lenders respond to changing market expectations.
Fixed-rate mortgages
If you have a fixed-rate mortgage, today’s decision will not change your current monthly payments because your interest rate is fixed for the agreed period.
However, if you are looking for a new fixed-rate mortgage or approaching the end of your current deal, the rates available to you can still change. Fixed mortgage pricing is influenced by market expectations for future interest rates and other factors, including swap rates.
This means fixed mortgage rates can rise or fall even when the Bank of England leaves the Base Rate unchanged.
Tracker mortgages
Tracker mortgages typically follow the Bank of England Base Rate, usually at an agreed percentage above or below it.
As the Base Rate has remained at 3.75%, borrowers on a tracker mortgage should see no immediate change to their mortgage rate as a result of today’s decision.
However, if the Base Rate changes in the future, your tracker mortgage rate and monthly payments are likely to change in line with the terms of your mortgage.
Variable rate mortgages
Standard Variable Rate (SVR) mortgages are not directly linked to the Base Rate in the same way as tracker mortgages, so lenders can choose when and whether to change their SVR.
Today’s Base Rate hold therefore does not automatically mean your SVR will remain unchanged. If your lender changes its SVR, your monthly mortgage payments could increase or decrease as a result.
If you are currently on an SVR, it may therefore be worth reviewing your options to see whether another mortgage deal could be more suitable for your circumstances.
What is the current outlook of the mortgage market?
The mortgage market remains volatile, with fixed mortgage rates coming under pressure as expectations around future interest rates have changed.
While the Bank of England has held the Base Rate at 3.75%, market expectations around future interest rates continue to evolve, contributing to movements in swap rates, which can increase the cost of funding for lenders and put upward pressure on fixed mortgage rates.
Alongside this, two and five-year swap rates rose to their highest levels since October 2023. As swap rates are an important factor in determining fixed-rate mortgage pricing, their increase is likely to have limited lenders’ ability to reduce rates and may have contributed to some mortgage rates rising during the month.
This means borrowers should not assume that a Base Rate hold will automatically lead to lower mortgage rates. Fixed-rate pricing can change quickly as lenders respond to movements in financial markets and changing expectations for the future direction of interest rates.
For those approaching the end of their current mortgage deal, reviewing their options early can therefore be particularly important while market conditions continue to evolve.
Why do swap rates affect fixed mortgage rates?
Swap rates reflect market expectations for where interest rates are heading and are an important factor in how lenders price fixed-rate mortgages.
When swap rates rise, lenders may increase their fixed mortgage rates to reflect higher expected borrowing costs. When swap rates fall, lenders may have more scope to reduce their fixed-rate pricing.
This means fixed mortgage rates can move independently of the Bank of England Base Rate. As a result, mortgage pricing may change before the MPC makes its next decision, or even during periods when the Base Rate remains unchanged.
Need help understanding what the latest rate changes mean for you?
Keeping up with changes to the Base Rate, mortgage rates and the wider market can feel overwhelming, especially when there are so many headlines to navigate. The reality is that what matters most is how these changes affect your own plans and personal circumstances.
Whether you are coming to the end of your current mortgage deal, thinking about your next move, buying your first home or simply looking for some reassurance, we are here to help.
At Cooper Associates Mortgages, we will take the time to understand what is important to you, explain your options clearly and help you make informed decisions with clarity and confidence.
Because mortgages are not just about rates and repayments, they are about homes, families and the moments that matter most. That is why we are proud to be with you for life’s big moments.
Get in touch today and let’s talk about what is next for you.
