UK interest rates remain at 3.75% after the Bank of England voted to keep borrowing costs unchanged at its September meeting. The decision was supported by six members of the Monetary Policy Committee, while three preferred an increase to 4%.

The pause matters because Bank Rate influences the cost of mortgages, loans and savings products across the UK. Although rates have fallen from their recent peak, the outlook has become less predictable as inflation and energy costs remain elevated.

Why Rates Have Stopped Falling

The Bank of England began reducing rates in 2024 after Bank Rate had reached 5.25%. By December 2025, it had fallen to 3.75%, where it has remained through 2026.

The main obstacle to further cuts is inflation. UK consumer-price inflation rose to 3.1% in August, above the Bank’s 2% target. Around 0.7 percentage points of that overshoot came directly from energy prices, particularly motor fuels. The Bank now expects inflation to rise further in the coming quarters if energy pressures persist.

Bank of England governor Andrew Bailey explained that the recent increase in energy prices had materially worsened the near-term inflation outlook. He said that while there was still limited evidence of broader second-round effects in wages and prices, prolonged energy volatility could eventually make tighter monetary policy necessary.

What It Means For Mortgages

For homeowners, the effect depends heavily on the type of mortgage they have.

People with tracker mortgages can see their payments change relatively quickly when Bank Rate moves, while lenders decide separately how much to adjust standard variable rates.

Most borrowers are on fixed-rate products, meaning their monthly payments do not immediately change when the Bank announces a rate decision. The pressure arrives when those deals expire and households need to refinance.

Average fixed mortgage rates have climbed again during September. Moneyfacts recorded an average two-year fixed rate of 5.88% and a five-year fixed rate of 5.91% on 21 September.

That creates a significant challenge for borrowers leaving older deals. Around 800,000 fixed mortgages at 3% or below are expected to expire each year on average until the end of 2027, meaning many households could face substantially higher monthly repayments when they refinance.

Why Mortgage Rates Can Rise Even When Bank Rate Does Not

An unchanged Bank Rate does not guarantee stable mortgage pricing.

Fixed mortgage rates are influenced strongly by swap rates, which reflect expectations about future interest rates and broader financial-market conditions. The Bank of England noted that short-term market interest rates had risen and that higher wholesale funding costs had already been passed through quickly to lending rates faced by households and businesses.

Recent market volatility has therefore pushed mortgage costs higher even without an official Bank Rate increase.

For borrowers approaching the end of a fixed deal, the government’s Mortgage Charter allows many customers to secure a new product up to six months before their current deal expires and switch to a better like-for-like option with the same lender if one becomes available before the new term starts.

Savers Face A Different Picture

For savers, higher interest rates can be more positive because banks may offer better returns on deposits.

However, savings rates do not always rise as quickly as mortgage rates. Recent market data showed that easy-access accounts were paying far less on average than borrowers were being charged for mortgages, reflecting differences in how banks price deposits and loans.

This means savers may benefit from comparing accounts rather than assuming their existing provider will automatically offer a competitive return.

What Happens Next?

The next scheduled Bank of England decision is due in early November 2026. Policymakers have made clear that future action will depend heavily on energy prices, inflation expectations, wages and the strength of the UK economy.

For households, the key message is that the period of steadily falling borrowing costs has paused. Mortgage rates may continue to move even while Bank Rate stays unchanged, while savers could still find worthwhile returns by shopping around. The coming months will depend largely on whether inflation begins to ease again or remains stubbornly above target.