When you take out a mortgage, you pay interest on the amount you borrow, and the bank rate set by the Bank of England (BoE) can affect your repayments. Read on to find out why and how the bank rate could affect you in 2026.

Explained: The Bank of England’s bank rate

The “bank rate” or “base rate” is the interest rate set by a country’s central bank, the BoE in the UK. This is the rate that the BoE pays commercial banks for holding their money, or charges them when they borrow.

As a consumer, you don’t directly pay the bank rate. However, it influences the interest rates of banks or building societies. As a result, when the bank rate changes, your cost of borrowing, including through a mortgage, might change as well.

The bank rate is decided by the BoE’s Monetary Policy Committee (MPC), which meets roughly every six weeks, although emergency meetings can be called following unexpected events. The MPC can choose to raise, cut, or hold the bank rate.

The bank rate can remain unchanged for long periods. For example, the bank rate was cut to 0.5% in April 2009 following the financial crisis. It stayed at this rate until August 2016. However, it’s changed a lot during the last five years.

How the bank rate changed between 2020 and 2025

The primary reasons for changing the bank rate are to keep the economy healthy and control inflation – the BoE aims to keep inflation near the government’s 2% target.

When the bank rate decreases, borrowing usually becomes cheaper, so it encourages people to spend more money. In contrast, when the bank rate increases, savings can become more attractive.

In 2020, the Covid-19 pandemic affected the economy and spending habits. This resulted in the BoE slashing the bank rate to a record low of 0.1%. This was then followed by the bank rate rising between December 2021 and August 2023 as inflation soared.

As inflation was brought under control and neared the 2% target, the MPC has cut the bank rate several times. As of December 2025, the bank rate is 3.75%.

As a result, changes to the bank rate over the last five years have had a significant impact on people with mortgages.

The BoE has stated it expects the bank rate to fall gradually in the future. However, it notes that it will depend on other variable factors, such as wage growth and service inflation.

When does the changing bank rate affect you?

How quickly you’ll be affected by the bank rate changing will depend on the type of mortgage you have.

A tracker-rate mortgage tracks the BoE’s base rate, and the interest rate you pay will usually change within a few days of an announcement being made.

Following an announcement by the MPC, lenders will review their own interest rates. This can take several weeks. If you have a variable-rate mortgage, your repayment might change once your lender’s review has concluded. Your lender must notify you if the interest you pay will change.

Finally, if you choose a fixed-rate mortgage, the interest rate will not change until the deal ends. Typically, you take out a mortgage deal for two, three, or five years. When your mortgage deal ends, you may notice that the interest rate you’re offered is higher or lower than what you’ve been paying as a result of the changing bank rate.

A fixed-rate mortgage can be useful if you prefer to know exactly what your outgoings will be each month. However, if the bank rate falls, as it is predicted to in 2026, you wouldn’t benefit from it.

Of course, there’s no guarantee that the bank rate will fall as the BoE anticipates. An unexpected shock could affect the decision the MPC makes.

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Please note:

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.