Base rate held at 4.25% – here's what it means 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 – 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 – set by the Government – of 2% for the Consumer Prices Index (CPI) measure of inflation.

Why the base rate was held

The Bank's Monetary Policy Committee (MPC), which determines the rate, voted as follows:

• Six members, a majority, voted to keep the rate at 4.25%;

• Three members voted for a cut to 4%.

The Bank said risks to inflation remain, adding that "a gradual and careful approach" to any future cuts "remains appropriate".

The latest figures show that CPI inflation slowed to 3.4% in the 12 months to May this year, compared to 3.5% in April – above the Bank's target of 2%.

Commenting on the factors at play in the Bank's decision, Laith Khalaf, head of investment analysis at investment platform AJ Bell, said: "The escalation of conflict in the Middle East has bumped up the oil price, which will put upward pressure on inflation if sustained. Meanwhile the threat posed to the global economy from tariffs remains present, if not quite as enormous as it did two months ago.

"Then there's the UK economy, which contracted sharply in April, albeit after a good growth spurt in the first quarter of the year. Add in a weakening labour market, and you have a smorgasbord of mixed messages which the Bank of England has to make some sense of."

Experts still think the base rate is likely to be cut this year

Nicholas Mendes, of mortgage broker John Charcol, said: "For now, the MPC is sitting tight, and that feels like the sensible choice. But markets still expect a cut or two later this year, possibly as soon as August."

Mr Khalaf echoed this, noting that current market consensus was around "a rate cut in August or September, and then another one by year end".

However, Ben Thompson, of broker Mortgage Advice Bureau, cautioned that the Bank will be concerned about the heightened tensions in the Middle East leading to higher inflation. "Until this latest position demonstrably eases, and the outlook becomes clearer, I don't think there will be a rush to cut again," he said.

Brokers say the outlook for mortgage deals is uncertain

Aaron Strutt, of mortgage broker Trinity Financial, said: "Mortgage rates have increased in recent weeks but they seem to have stabilised so the best deals are still priced below 4%.

"The general consensus is that rates will get a bit cheaper over the near term, especially as the base rate comes down. The issue is there are some pretty significant global challenges at the moment, so there are no guarantees."

Mr Mendes said: "The path for mortgage pricing will depend less on today's decision and more on whether inflation, particularly in services, continues to fall towards the Bank's 2% target. The message for borrowers remains the same: stay alert, plan ahead, and be ready to act if the right opportunity arises."

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 6.5% to 7.5%, while the top two- and five-year fixed rates stand at around 3.9%. 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 cut last month, top savings rates have dropped slightly across the board – but it's still 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 rate is from app-based bank Atom at 4.75% variable. It's best for those not planning to withdraw money too often as the rate drops to 2.5% in any month you withdraw. It's also beatable for those who haven't used up this tax year's £20,000 ISA allowance, as cash ISAs from Trading 212 and Plum pay slightly higher rates for newbies at 4.92%.

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