Bank of England holds interest rates at 3.75%, as experts predict just one cut in 2026 ...Middle East

The Bank of England has opted to keep interest rates at 3.75 per cent in its latest meeting.

In a widely expected decision, the bank’s Monetary Policy Committee (MPC) voted not to follow December’s reduction to rates with another cut.

But the vote was closer than many expected, with the nine-strong committee voting 5-4 to keep rates on hold.

It comes after inflation jumped up to 3.4 per cent in the most recent reading, released in January.

What does the hold mean for mortgage rates?

A reduction to interest rates would have meant an immediate cut to some mortgage deals – tracker mortgages go down when rates are cut and most standard variable mortgages do too.

Fixed rate mortgages, which most households have, are less directly linked to interest rates.

Fixed pricing tends to follow swap rates, which are based on long-term predictions for where the Bank of England base rate could go in the future.

“In practical terms, a hold is unlikely to prompt an immediate repricing of mortgages,” Nick Mendes, mortgage technical manager at John Charcol brokers said.

He added: “The focus now shifts to swaps. Swaps remain relatively stable at the front end, with one- and two-year swaps in the mid threes and five-year money closer to the high threes. That stability has already allowed lenders to trim rates gradually and compete more actively.

“Some uptick in repricing has been seen this week, but further incremental reductions from the same lenders would not be surprising over the next few weeks.”

What does the hold mean for saving rates?

Savings rates also tend to come down as the Bank of England interest rate does.

In that respect, a hold could mean that savings rates do not drop as quickly as they would otherwise.

But experts say that banks have already hugely reduced rates this year, before the cut.

Figures from data company Moneyfacts shows that more than two thirds (70 per cent) of savings providers have cut rates since the start of 2026.

“While savings rates may be doomed to fall further in 2026, it’s uncertain how far they could tumble and how soon,” said Rachel Springall, financial expert at Moneyfacts.

When will interest rates be cut again?

Some economic forecasters are predicting that interest rates will only go down once this year.

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Interest rates tend to fall when inflation gets closer to its 2 per cent target. Inflation is currently well above this level, but is expected to fall soon.

Alongside today’s decision, the Bank said it expected inflation to fall back to around the 2 per cent target from April.

Pantheon Macroeconomics is predicting just one cut to interest rates in 2026, to come in April.

Robert Wood, its chief UK economist, wrote in a note: “We expect one more rate cut in April, but stubborn pay growth could easily stay the MPC’s hand. We think growth will hold up, payrolls will be revised up, pay growth will stabilise, and inflation expectations will remain elevated.

“What’s more, we peg the neutral interest rate at around 3.75 per cent, so we think rates are no longer restrictive.”

Thomas Pugh, an economist at accountancy firm RSM UK also added: “The MPC will be more cautious about future rate cuts as they approach neutral, we expect just one cut this year in April.”

Some experts do predict more cuts though.

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Oxford Economics has forecast an April cut to be followed by a further reduction in November.

It added in a note this week: “[By April] he MPC will be able to assess how the new year pay deals are materialising in the official data, and there should also be further evidence of subdued growth and slack accumulating in the labour market.

“After that, we expect the MPC’s desire to move cautiously will see it onlycut once more this year, in November.”

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