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Are UK interest rates going down in 2026?
Rates have come down a long way, but the cutting may be near its end. The Bank of England base rate is 3.75%, down from a 5.25% peak, and the MPC held it there in June 2026 with two members voting to raise. What happens next, explained.
UK interest rates have come down substantially, though the cutting phase may be approaching its end. The Bank of England began reducing its base rate in August 2024 from a 16-year high of 5.25 percent, and as of June 2026 it stands at 3.75 percent. At its June meeting the Monetary Policy Committee voted seven to two to hold, and notably, both dissenters wanted a rise, not a further cut. The direction of travel is no longer simply downward, and what happens next matters considerably for anyone with a mortgage, savings account, or business borrowing. For how the rate is set and what it actually controls, see our explainer on the Bank of England base rate.
Where rates came from and why they rose
The Bank of England raised rates aggressively from their pandemic-era low of 0.1 percent between December 2021 and August 2023, when the base rate reached 5.25 percent. The purpose was to bring inflation back to the 2 percent target. CPI inflation had reached 11.1 percent in October 2022, driven initially by global energy prices following Russia's invasion of Ukraine and sustained by domestic wage and services price pressures that proved more persistent than the Bank's initial forecasts anticipated.
The rate cycle was the sharpest tightening in a generation. UK households had become accustomed to rates below 1 percent for over a decade. The move to 5.25 percent in less than two years passed through to mortgage costs almost immediately for those on tracker or variable-rate products, and with a lag for those refinancing onto new fixed-rate deals as they expired.
How quickly are rates coming down?
The pace of cuts has been cautious. The Monetary Policy Committee voted for its first reduction in August 2024, and subsequent cuts have come at irregular intervals rather than at every meeting. The Bank has been explicit about why: services inflation, which reflects domestic wage and price-setting behaviour, has been stickier than goods inflation, and the MPC has been reluctant to cut more quickly whilst that component stays elevated.
The June 2026 decision suggests the easy phase of the cutting cycle is over. CPI inflation has fallen to 2.8 percent, close to the 2 percent target, but the Bank expects it to rise again later this year as higher energy prices feed through, global energy costs having climbed and stayed volatile in response to events in the Middle East. With two of the nine MPC members voting to raise rather than hold in June, further cuts from 3.75 percent are no longer the default assumption. The next decision lands on 30 July 2026, alongside a quarterly Monetary Policy Report and its updated forecasts.
What falling rates mean for mortgages
The pass-through from base rate cuts to mortgage costs is uneven depending on product type. Tracker mortgages move in line with the base rate, so borrowers on trackers have already seen monthly payments fall as the base rate has been reduced. Variable-rate products typically follow with a short lag. Fixed-rate mortgages are priced off swap rates rather than the base rate directly, and swap rates reflect market expectations of where rates will be over the fixed term rather than the current base rate level.
The practical position for most mortgage holders is that costs have come down gradually, but not to the levels of 2020 or 2021. A borrower refinancing onto a two-year fixed deal today is accessing rates considerably higher than those who fixed in 2020 and 2021, and materially lower than those who fixed at the peak in 2023, when the average two-year fix exceeded 6 percent. If the base rate has stopped falling, fixed rates will settle rather than keep drifting down, because they price off where markets expect rates to be, not where they are today. For a detailed look at how this is feeding through to fixed and tracker products, see our note on whether UK mortgage rates are going down.
Are savings interest rates going down?
Savings rates moved up sharply when the base rate rose, and they have fallen back as the base rate has come down. The best easy-access rates, which reached 5 percent and above in late 2023, have declined alongside each cut, and fixed-term savings bonds and cash ISA rates have come down proportionally. The window of genuinely attractive cash savings returns has narrowed through the cutting cycle.
For savers who benefited from the rate cycle by locking in longer-term fixed rates in 2023, those deals will mature into a lower-rate environment. If the base rate now holds at 3.75 percent, savings rates should stabilise around current levels rather than continue to slide, though providers reprice with a lag and competition between them matters as much as the base rate itself.
What this means for business borrowing
Business borrowing costs are linked to the base rate through commercial lending rates, which typically sit several percentage points above the base rate depending on the borrower's credit profile and the nature of the facility. The rate increases of 2022 and 2023 raised the cost of floating-rate business debt significantly. Businesses that took on or renewed revolving credit facilities, overdrafts, or term loans at the peak of the cycle are carrying a higher cost of capital than their 2020 or 2021 equivalents.
The fall in the base rate since August 2024 has already lowered the cost of variable-rate business borrowing, improving cash flow for businesses with significant floating-rate debt. For businesses that have been deferring investment or expansion because of the interest rate environment, the backdrop is more favourable than it was, though rates remain well above their post-2010 average and the June 2026 hold suggests they will not return anywhere near those levels. For many firms the bigger uncertainty is demand, which turns on the risk of a UK recession more than on the rate path alone.
Following the rate cycle
Interest rate decisions feed directly into the consumer and business conditions tracked by CPIx, Briefed's composite consumer pressure index. Falling rates pass through to the mortgage cost burden on households, the cost of consumer credit, and the savings income available to households, all of which shift the consumer pressure picture over time. Every Bank of England Monetary Policy Committee decision and quarterly Monetary Policy Report is covered in the Briefed daily briefing, weekdays at 6:45am. Free to read.