BoE Holds Rate at 4% as Inflation Fears Persist, Shaping Mortgage and Savings Outlook

The Bank of England on Thursday held the Bank Rate at 4% at its latest policy meeting, with the Monetary Policy Committee voting 7-2 to keep rates unchanged. The decision keeps the base rate 1.25 percentage points below its 5.25% peak reached a little over a year ago. The next decision is due on 6 November and will hinge on the trajectory of inflation and the overall health of the economy.

The hold is bad news for households hoping to see mortgage costs ease, but it is likely to be welcomed by savers, as is typical when the base rate stabilizes or falls. Lenders generally price mortgage products against expectations for the longer-run trajectory of rates rather than reacting to a single decision. Markets have been pricing in a slower path to any further cuts, with some analysts not forecasting a base-rate move until 2026.

What this means for mortgage borrowers: Keeping the base rate at 4% means rates are unlikely to move much in the near term. The cheapest two-year remortgage fix for a homeowner with around 40% equity is currently about 3.81%, while the lowest five-year fix sits near 3.88%. Halifax is offering a 3.81% two-year fix with a £999 fee, and NatWest has a 3.88% five-year deal with a £1,495 fee. On a £200,000 mortgage over 25 years, these rates translate to roughly £1,035 a month at 3.81% and around £1,088 at 4.29%. Mortgage pricing, however, already reflects expectations of possible rate moves in the future rather than today’s decision alone.

Chris Sykes, a property finance specialist at MSP Financial Solutions, said the hold was not surprising and should support market stability. 'Mortgage lenders have been pricing in a hold, so rates are unlikely to move much,' he said. 'Tracker rates, which track the BoE base rate, will stay the same, and variable rates are not expected to change significantly.'

The outlook for mortgage rates depends on the inflation path and the broader economy. Latest official data show inflation running at 3.8% in August, well above the Bank’s 2% target, complicating the prospect of near-term easing.

Ravesh Patel, director and senior mortgage consultant at Reside Mortgages, said that if inflation cools, lenders could trim rates modestly, but the overall economy remains sluggish. 'In the short run, if inflation falls, we may see lenders cut rates a little,' Patel said. 'The economy’s growth is uncertain, so I would expect base rates to fall gradually, potentially toward 3% over the course of next year.' Peter Stimson, director of mortgages at MPowered, cautioned that further cuts depend on inflation staying in check. 'Inflation is still running hot relative to target, so further easing could be limited,' he noted.

Market expectations for further base-rate reductions remain mixed. Swap rates — used by lenders to price fixed-rate products — still imply two additional cuts are possible, but timing could be pushed into next year. Even so, those cuts are already baked into current mortgage pricing, which means the relief for borrowers may be modest if they arrive.

What this means for savers: The base rate path influences how much interest savers earn. With the BoE rate held at 4%, savings rates have continued to drift lower, particularly for easy-access accounts. The average easy-access rate has fallen below 3%, well under the consumer price index (3.8%). Top easy-access deals currently sit around 4.3%, with some restricted accounts offering as much as 5%.

Moneyfacts Compare said the Moneyfacts average savings rate stands around 3.46%, down from a year ago. If the base rate were to fall to around 3.5% by spring 2026, market forecasts suggest easy-access rates would dip below 4% for the first time since mid-2023, while fixed-rate bonds could settle around the low-to-mid 4% range.

'Current savings rates are higher than they should be for a 4% base rate, which is expected to fall to roughly 3.5%,' said James Blower, founder of The Savings Guru. 'Savers should consider locking in when rates look relatively attractive and the terms fit their liquidity needs.'

For savers aiming to maximize returns, the market offers a mix of easy-access and fixed-rate options. The best easy-access deals are around 4.3%, though many high-street accounts pay less. The strongest fixed-rate options include one-year deals near 4.45%, with two-year to five-year bonds clustered in the low 4% range depending on institution and terms. Cash ISAs remain a tax-efficient avenue for savers, with several providers offering competitive rates within the mid-4% range, subject to FSCS protections.

Savers should regularly compare products and consider whether a fixed-rate or ISA allocation best aligns with liquidity needs and tax considerations. For those who can lock away money for a fixed term, a fixed-rate bond or cash ISA can provide protection against inflation while rates remain elevated. As markets price in a gradually easing path, the decision to lock in versus stay flexible remains highly individualized, depending on the saver’s timeline, risk tolerance, and tax situation.