Bank of England holds base rate at 4.5% – here's why and when it might be cut next

The base rate is used by the central bank to charge other banks and lenders when they borrow money – and so it influences what borrowers pay and what savers earn.

It's also used by the Bank of England as a tool to control inflation (the rate at which prices rise). The Bank has a target of 2% for the Consumer Prices Index (CPI) measure of inflation, which is set by the Government.

Why the base rate was held

On Thursday 20 March, the Monetary Policy Committee (MPC) voted by a majority of 8-1 to maintain the base rate at 4.5%, with one member voting for a cut to 4.25%.

The latest figures show that the Consumer Prices Index (CPI) measure of inflation rose to 3% in January this year, up from 2.5% in December 2024; above the Bank's target of 2%.

Explaining the reasons for its decision, the Committee said: "Domestic price and wage pressures are moderating, but remain somewhat elevated. Although global energy prices have fallen back recently, they remain higher than last year and CPI inflation is still projected to rise to around 3.75% in [July to September] 2025."

Nicholas Mendes, of mortgage broker John Charcol, said: "The Bank’s decision signals a preference to keep monetary policy steady until there is clearer evidence that inflation is easing sustainably. With headline inflation rising to 3% in January and expected to climb further by summer, policymakers remain cautious about moving too soon and risking a reversal of progress in stabilising prices."

Analysts think the base rate is likely to be cut this year

Ben Thompson, of broker Mortgage Advice Bureau, said: "Right now the tussle is between inflation and economic growth. The Bank of England today has shown it's more worried about inflationary pressures than the current woeful GDP figures. Many believe this worry will shift later in the year and we may get another rate cut or more, but for now the inflation genie needs to go back into the bottle, hence no rate change.”

Myron Jobson, senior analyst at investment platform Interactive Investor, said: "When the BoE will cut interest rates next remains the burning question. The financial markets are pointing to May – although there are no guarantees."

Macroeconomist Matt Swannell, from the economic research group EY Item Club, said: "It seems likely the current gradual pace of interest rates cuts will continue until at least the summer, at which point the MPC will likely have more meaningful information to hand on the longer term outlook."

Brokers say mortgage deals could improve slightly in the short-term

Aaron Strutt, of mortgage broker Trinity Financial, said: "Lenders have been making their rates marginally cheaper as they try to attract more customers. We are likely to get more of the same."

Nicholas Mendes, of mortgage broker John Charcol, added: "With swap rates [which lenders pay to get funding for fixed-rate mortgages] holding steady, mortgage lenders have greater scope to reduce rates further – but the pace and extent of these reductions will depend on [a number of] factors."

But Mr Thompson cautioned: "Although there is prospect of mortgage rates reducing slightly later this year, much of this is already built into market pricing today, and fixed mortgage rates already. Mortgage rates are close to where they are likely to be now for some time, in all likelihood.

"If we suddenly see a raft of base rate reductions because economic growth remains muted this year and inflation falls back to the 2% target level or lower, we may see lower fixed rates later this year."

On your lender's SVR? You can likely save £1,000s with a new deal

A standard variable rate (SVR) is the rate you pay once your current mortgage deal comes to an end. SVRs have a variable rate of interest, which means the rate can change at any time.

SVRs are normally far more expensive than the best fixed or tracker deals – right now, a typical SVR is around 7% to 8%, while the average two and five-year fixed rates stand at around 5%. So if you're on an SVR, you should consider switching to a new deal now – see our Cheap mortgage finding guide.

Savings rates have dropped slightly – but you can still find a good deal

Since the base rate was last cut in February this year, we've generally seen savings rates drop slightly across the board. Following the base rate decision, Mr Jobson warned: "The best savings rates appear to be on borrowed time. Barring any economic shocks, the only likely direction for interest rates is downward."

As a result, it's crucial to check your interest now. Millions are on pants rates, and can easily and simply move their money to where it pays more. And if you're on a fix, diarise to act before it ends.

Currently, the top easy-access cash ISAs beat normal savings – Moneybox pays newbies 5.28% (including a temporary bonus of 1.08% for three months), while Tembo pays a straight 4.8%. If you've used up your ISA allowance for this year, the top hassle-free standard easy-access rate is 4.59% from Charter Savings Bank.

For lots more options, see our Top savings accounts guide.