6 February 2026 | UK Mortgage Blog

Bank of England Holds Base Rate at 3.75% in Dovish First Decision of 2026

On 6 February 2026, the Bank of England's Monetary Policy Committee (MPC) voted to hold the base rate at 3.75%, keeping borrowing costs unchanged in its first decision of the new year. However, this was far from a straightforward hold. The vote split 5-4, with a significant minority pushing for an immediate cut, sending a clear signal that lower rates are likely just around the corner.

A Closely Divided Committee

The MPC was split almost down the middle. Governor Andrew Bailey was joined by Megan Greene, Clare Lombardelli, Catherine Mann and Huw Pill in voting to maintain Bank Rate at 3.75%. Meanwhile, Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor voted for a 0.25 percentage point cut that would have brought the rate down to 3.50%.

The narrow 5-4 vote is significant because it suggests the committee is on the cusp of delivering further easing. With four members already ready to cut, it would only take one more to shift the balance at the next meeting. The overall tone of the accompanying statement was decidedly dovish, with the Bank acknowledging that inflationary pressures are easing and that the economic outlook warrants a cautious approach to keeping rates at current levels.

Inflation: Above Target but Falling

The Consumer Prices Index (CPI) stood at 3.4% in December 2025, still well above the Bank's 2% target. This above-target reading was one of the key reasons cited by the majority for holding rates steady at this meeting. However, the Bank's own forecasts paint a more optimistic picture. The MPC expects inflation to fall back towards around 2% by spring 2026 as the effects of earlier energy price rises continue to fade and demand-side pressures moderate.

This forward-looking view is crucial. While headline inflation remains elevated, the trajectory is clearly downward. The committee appears confident that the current rate level is sufficiently restrictive to bring inflation back to target without the need for further tightening, and the debate has firmly shifted to when and how quickly to ease policy rather than whether to ease at all.

What This Means for Mortgage Borrowers

With the base rate held steady at 3.75%, the immediate impact on borrowers is one of continuity rather than change. Tracker and standard variable rate (SVR) mortgage holders will continue paying at the same level they have been since the last cut in December. However, the mortgage market is already looking ahead and pricing in future reductions.

Tracker Mortgages: No change this month. Payments remain at the level set after the December reduction. A cut in March would deliver further savings.
Standard Variable Rates: SVR borrowers continue to pay their current rate. If you are on your lender's SVR, it is well worth exploring a switch to a fixed deal, as current fixed rates are significantly lower.
Fixed Rate Mortgages: This is where the real action is. The best 2-year fixed rate deals are currently available at around 3.55%, and the leading 5-year fixed rates sit at approximately 3.76%. Both are notably below the current base rate, as lenders price in the expectation of future cuts.

Looking at broader averages, the typical 2-year fixed rate has fallen to about 4.83%, while the average 5-year fixed rate is around 4.91%. These figures are considerably lower than the peaks seen in 2023 and continue to trend downwards as competition among lenders intensifies.

Lender Competition at an 18-Year High

The mortgage market is experiencing a surge in competition that is directly benefiting borrowers. The total number of mortgage products available has risen to its highest level in 18 years, giving consumers more choice than at any point since before the 2008 financial crisis.

Some lenders briefly increased their rates in early 2026 in response to lingering inflation concerns and movements in swap rates. However, many have since reversed course and cut rates again as the outlook for base rate reductions has strengthened. Notably, three major lenders announced substantial rate cuts in the opening weeks of 2026, putting further competitive pressure on the rest of the market.

This environment of fierce competition means that borrowers who shop around or use a broker are likely to find significantly better deals than the headline averages suggest. Lender pricing is moving quickly, so acting promptly when you spot a good deal is advisable.

What to Expect Next: March 2026 and Beyond

The next MPC decision is scheduled for 19 March 2026, and expectations for a cut are running high. Over 60% of economists surveyed expect the committee to reduce the base rate to 3.50% at that meeting. Given the 5-4 vote split in February, it would only require one member of the current majority to change their position for a cut to be delivered.

Looking further ahead, financial markets are pricing in a base rate of 3.25% or lower by the end of 2026. If these expectations are realised, it would represent a further 50 basis points of cuts over the course of the year, bringing additional relief to borrowers on variable and tracker deals and likely pushing fixed rates even lower.

Advice for Borrowers: Start Planning Now

If your fixed rate deal is due to expire in 2026, now is an excellent time to start exploring your options. Current fixed rates are significantly better than they were a year ago, and the competitive landscape means there are plenty of attractive deals available. While rates may fall further in the months ahead, today's deals already reflect much of the expected easing.

Most lenders allow you to lock in a rate up to six months before your current deal expires, meaning you can secure today's rates while still benefiting if rates fall further before completion. This approach gives you a safety net without the risk of missing out on current pricing.

Use our mortgage calculator to compare different scenarios and see how potential rate changes could affect your monthly repayments. Whether you are remortgaging, a first-time buyer, or simply reviewing your current arrangement, understanding the numbers is the essential first step.