Interest rates will remain at 3.75 per cent with Bank of England policymakers staying cautious as inflation slowly comes down.
The Bank of England held its first vote on interest rates of 2026 on Thursday, with the hold widely expected following December’s rate cut to 3.75 per cent.
The nine Monetary Policy Committee members voted with a majority of 5-4.
If the economy and the outlook for inflation evolve as expected, there should be scope for further cuts to interest rates this year, the Bank of England said.
It has also cut its outlook for UK economic growth for 2026, from 1.2 per cent to 0.9 per cent, and for 2027, from 1.6 per cent to 1.5 per cent.
December’s cut marked a fourth lowering in 2025, as the Monetary Policy Committee (MPC) opted for a slow and cautious approach, as they attempt to balance lingering inflation, slow growth in the economy, high wages and rising unemployment.
Inflation rose unexpectedly to 3.4 per cent last month. However, consumers were given a small sigh of relief with recent news that grocery inflation has eased slightly of late.
Interest rates live: Key points
- Interest rates held at 3.75%
- Bank of England cuts outlook for UK economic growth
- What does the MPC vote split suggest?
- Pound sinks against US dollar and the euro
- Bank of England must be bolder, says trades union group
How to spend like a pro - with Gabriel Nussbaum
15:20 , Harriette BoucherMore than half of homeowners are worried about rates
15:01 , Harriette BoucherJust over half of homeowners are worried about increasing interest rates and keeping up with mortgage payments, a survey has found.
As the Bank of England announced that interest rates would hold at 3.75 per cent, a fifth of homeowners say rates are still pricing them out of a property move.
Elliot Castle, chief executive of We Buy Any Home, which commissioned the survey of 1,000 UK homeowners, said: “The last few years has seen a rough ride for many homeowners.
“Borrowing costs are continuing to shape decision making across the property market and our insights add fresh urgency to calls for a more supportive lending environment.
“Many potential movers are still feeling the pinch of elevated mortgage costs and economic uncertainty. A rate cut could really breathe life into the housing market, which is currently rather stagnant.
“Interest rates aren’t just numbers, they affect dreams of a bigger home, making an all-important location move or even the difference in space for a growing family.”
Best savings accounts and cash ISAs still paying up to 4.5% on your money in January 2026
14:44 , Harriette BoucherWith interest rates getting another cut in December, the base rate is down to 3.75 per cent meaning many of the best high-interest savings accounts have had, or will get, a trim soon.
However it’s still possible to get more than 4 per cent on your cash if you move swiftly, while remembering it’s always important to keep your savings earning more than the rate of inflation - which currently sits at 3.2 per cent.
As usual, here’s our round-up of the best savings accounts available right now from banks, building societies and other finance providers, but make sure to check back regularly if your rate is chopped or bonuses removed.
The Independent's Business and Money Editor Karl Matchett reports:
Best savings accounts and cash ISAs still paying up to 4.5% in January
'Sharp divide' within MPC over how much evidence is required to cut rates
14:25 , Harriette BoucherThe close vote split suggests that a sharper divide is emerging within the Monetary Policy Committee over how much evidence is required before cutting rates, according to a Swiss bank portfolio manager.
Tom Watts from Julius Baer said: “The message from Threadneedle Street today is clear: inflationary pressures are continuing to cool, even if the trajectory isn’t perfectly smooth.
“The unexpectedly close 5–4 vote captures that tension and has caught markets off guard. Sterling’s initial reaction suggests investors may have been overly cautious in assuming a slower, steadier path to easing.”
Some experts have suggested the vote split could signal a rates cut in March.
“The split hints that sentiment inside the Bank may be shifting faster than consensus expectations for borrowing costs this year,” Mr Watts added.
Recap: Interest rates held at 3.75%
14:11 , Harriette BoucherThe Independent's Business and Money Editor Karl Matchett:
No enormous surprise at the hold vote - the MPC have been extremely cautious about cutting over the last year as inflation slowly comes down, for fear of igniting again.
However, the vote was closer than many thought, at just 5-4 in favour of the hold. They have held firm against a backdrop of political pressure with Rachel Reeves' borrowing costs, economic distress signals amid no national growth and business leaders screaming for rates cuts, never signalling that more than one cut per quarter was ever likely to come.
This year, it could be even lower, as we head toward a neutral rate: the point where interest rates can support a growing economy and keep inflation in check.
It's very likely to be way higher than we saw for a decade or more post-financial crisis, when rates were barely above zero. Some analysts think 3 per cent will be the bottom line; others think slightly higher.
Either way, we may or may not reach it this year with only around two cuts expected - the next chance for one will be on 19 March and perhaps the markets will expect that to now be a cut, given how close this vote turned out to be.
‘Slaughter’ of savings rates will sadden hard-pressed households, expert warns
14:00 , Harriette Boucher
‘Slaughter’ of savings rates will sadden hard-pressed households, expert warns
What does the MPC vote split mean for mortgages?
13:50 , Harriette BoucherThe nine MPC members voted with a majority of 5-4 in favour of holding rates, which was closer than anticipated.
Simon Gammon, the managing partner of Knight Frank Finance, said that the fact four members voted in favour of a cut was a positive sign.
“Strong economic figures released over the past fortnight had prompted many of the larger lenders to raise mortgage rates in recent days, but this decision should reinforce a period of pricing stability,” he said.
“The best fixed rates have not moved higher and still sit at around 3.5%, but there has been considerable repricing across the middle of the market.
"Rates are already low enough to support a gradual recovery in activity, with borrowers broadly comfortable at current levels. That said, the pace is likely to remain slow and steady, particularly given the high level of homes currently for sale, which should limit upward pressure on prices and keep any renewed exuberance in the market in check.”
Watch: Gabriel Nussbaum on Saving vs Investing
13:40 , Harriette BoucherBank of England governor wants to see more 'sustainable' inflation reduction before cutting rates
13:31 , Harriette BoucherBank of England governor Andrew Bailey said he would like to see more “sustainable” reduction in inflation before cutting interest rates.
While inflation does dip below target, it is only a small dip, he said.
"We need to see this pattern emerge and more evidence, in my view, that we will have a sustainable return to target and that is more of an issue of underlying inflation.
"Just as last year, we had what we tended to call the hump. We have to be very focused on the underlying story."
As mortgages rise and savings rates fall, one cash ISA bucks the trend
13:20 , Harriette BoucherConsumers have been warned to ensure their finances are in order as a host of banks and building societies prepare to change rates on mortgages and savings accounts.
For those who are homeowners, savers or both, those changes are not in a positive direction. Several mortgage providers are shifting rates upwards, while headline rates on savings accounts are falling - with one notable exception.
That’s despite the Bank of England (BoE) not altering the base rate on Thursday, after interest rates were cut to 3.75 per cent in December.
The Independent's Business and Money Editor Karl Matchett reports:
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As mortgages rise and savings rates fall, one cash ISA bucks the trend
Interest rate cuts in March ‘on the table’
13:11 , Harriette BoucherThe Monetary Policy Committee is next reviewing interest rate in March, and a cut could be “on the table”, experts say.
Luke Bartholomew, Deputy Chief Economist, at Abderdeen said: “As long as inflation moderates further over coming months, we continue to expect he will swing behind further cuts in the not too distant future.
“A cut at the next Bank meeting in March is most certainly on the table. And even if it takes a bit longer for the next cut to come through, we still think there is a strong case for rates to eventually fall to 3% later this year.”
When will the Bank of England review interest rates this year?
13:01 , Harriette BoucherThe Monetary Policy Committee reviews and sets the UK’s base interest rate eight times a year, usually every six weeks.
When are interest rates going to be reviewed this year?
- Thursday 5 February
- Thursday 19 March
- Thursday 30 April
- Thursday 18 June
- Thursday 30 July
- Thursday 17 September
- Thursday 5 November
- Thursday 17 December
Bank governor Andrew Bailey said main message is 'good news'
12:50 , Harriette BoucherBank of England’s governor Andrew Bailey now expects inflation to fall back to around 2 per cent by spring.
“That’s good news,” he told a press conference on Thursday.
"We need to make sure that inflation stays there, so we've held interest rates unchanged at 3.75% today.
"All going well, there should be scope for some further reduction in the bank rate this year."
What the latest interest rates vote means for your mortgage, savings and bills
12:39 , Harriette BoucherThe Independent's Business and Money Editor Karl Matchett reports:
The Bank of England (BoE) announced on Thursday its decision to hold interest rates at 3.75 per cent, following a fourth cut of 2025 in December.
For December’s vote, the bank’s nine-person Monetary Policy Committee (MPC) showed a split vote which was 5-4 in favour of the cut - but this time in January it swung the other way, 5-4 in favour of holding. Even that was closer than had been expected though, signalling more rate cuts may lie ahead.
Following falling inflation rates, poor economic figures and rising unemployment, the base rate remains at the lowest level in around three years.
Here’s a brief rundown of what the current interest rate might mean for you:
What the latest interest rates vote means for your mortgage, savings and bills
Pound sinks against US dollar and the euro
12:36 , Harriette BoucherThe pound has extended its losses against the US dollar and the euro after the interest rate decision and steep downgrade to the growth outlook.
Sterling fell 0.6 per cent to 1.36 dollars and was 0.5 per cent lower at 1.15 euros.
The pound had already been losing ground earlier in the day amid increasing political turbulence and questions over Prime Minster Sir Keir Starmer’s leadership.
Bank of England must be bolder, says TUC
12:29 , Harriette BoucherThe Bank of England has been too cautious and should be bolder in the months of head as working people are still suffering, the Trades Union Congress said.
Responding to the Bank of England’s decision to hold interest rates this month, TUC general secretary Paul Nowak said: “Working people in every corner of the country are still being hammered by the living standards crisis.
“The Bank of England has a crucial role to play in easing pressures for mortgage payers, and boosting confidence across the economy so the UK can get back to stronger and sustainable growth.
“The Bank was too cautious last year. They should go further and faster with a rapid-fire sequence of rate cuts in the months to come.”
What does today's announcement means for savers
12:22 , Harriette BoucherKeeping interest rates at 3.75% is generally positive news for savers as it means average savings rates may remain higher for longer, experts have said.
Alice Haine, personal finance analyst at Bestinvest, said: “Savings rates have been drifting lower since peaking in the Autumn of 2023. And while inflation rose more than expected in December, much of that increase was largely attributed to temporary factors, including high airfare prices over the festive season.
“Inflation is still expected to ease back, which is expected to pave the way for further interest rate cuts.
“With this in mind, savers should avoid sitting on the sidelines waiting for conditions to improve. Money languishing in an account paying a dismal rate should be moved swiftly to a more competitive option to ensure it works as hard as possible. Few things are more frustrating for savers than seeing inflation quietly erode the value of their cash.”
Bank of England cuts outlook for UK economic growth
12:18 , Harriette BoucherThe Bank of England has downgraded its forecasts for economic growth for 2026 from 1.2% to 0.9%, and for 2027, from 1.6% to 1.5%.
What does the MPC vote split suggest?
12:16 , Harriette BoucherThe nine MPC members voted with a majority of 5-4 in favour of holding rates, which was closer than anticipated.
Simon Gammon, the managing partner of Knight Frank Finance, said that the fact four members voted in favour of a cut was a positive sign.
“Strong economic figures released over the past fortnight had prompted many of the larger lenders to raise mortgage rates in recent days, but this decision should reinforce a period of pricing stability,” he said.
“The best fixed rates have not moved higher and still sit at around 3.5%, but there has been considerable repricing across the middle of the market.
"Rates are already low enough to support a gradual recovery in activity, with borrowers broadly comfortable at current levels. That said, the pace is likely to remain slow and steady, particularly given the high level of homes currently for sale, which should limit upward pressure on prices and keep any renewed exuberance in the market in check.”
Interest rates held at 3.75%
12:03 , Harriette BoucherThe Independent's Business and Money Editor Karl Matchett:
No enormous surprise at the hold vote - the MPC have been extremely cautious about cutting over the last year as inflation slowly comes down, for fear of igniting again.
However, the vote was closer than many thought, at just 5-4 in favour of the hold. They have held firm against a backdrop of political pressure with Rachel Reeves' borrowing costs, economic distress signals amid no national growth and business leaders screaming for rates cuts, never signalling that more than one cut per quarter was ever likely to come.
This year, it could be even lower, as we head toward a neutral rate: the point where interest rates can support a growing economy and keep inflation in check.
It's very likely to be way higher than we saw for a decade or more post-financial crisis, when rates were barely above zero. Some analysts think 3 per cent will be the bottom line; others think slightly higher.
Either way, we may or may not reach it this year with only around two cuts expected - the next chance for one will be on 19 March and perhaps the markets will expect that to now be a cut, given how close this vote turned out to be.
Will interest rates go down today? Bank of England’s key factors and 2026 predictions
11:45 , Harriette BoucherThe Bank of England’s (BoE) next meeting to determine interest rates is on Thursday 5 February and all eyes will be on the Monetary Policy Committee (MPC) and whether its members opt to continue lowering rates.
The base rate - now at 3.75 per cent after being cut four times last year – impacts business, consumers and taxpayers through everything from mortgages to loans and savings, so what do experts foresee, both this week and beyond?
The Independent’s Business and Money Editor Karl Matchett reports:
Will interest rates go down today? Key factors and 2026 predictions
When will the Bank of England review interest rates this year?
11:39 , Harriette BoucherThe Monetary Policy Committee reviews and sets the UK’s base interest rate eight times a year, usually every six weeks.
When are interest rates going to be reviewed this year?
Seven ways to secure the best mortgage deal in the market
11:33 , Harriette BoucherHomeowners looking for a new mortgage deal will find a range of attractive offers available right now, though experts caution that the 'cheapest' rate is rarely the most suitable.
Since the Bank of England’s base rate cut to 3.75 per cent in December 2025, there’s been a significant price war among high-street lenders for the start of 2026 - but financial experts stress getting the lowest interest rate doesn’t necessarily mean you’re getting the best overall deal.
“For those searching for mortgages independently, it’s easy to be drawn in by the headline interest rate,” Rachel Geddes, strategic lender relationship director at the Mortgage Advice Bureau, said.
“However, the ‘cheapest’ rate is rarely the most suitable deal.
“The most common pitfall for DIY searchers is the fee-to-rate ratio. A lender might offer a highly competitive rate, but if it comes with a costly arrangement fee, you could end up paying more over the fixed term than you would with a slightly higher rate and no fee.”
Why today's vote split is important
11:18 , Harriette BoucherAs markets await the Bank of England’s inflation rates vote, the focus will be less on the decision and more on guidance, the vote split, and governor Andrew Bailey’s tone, a senior market analyst has said.
Daniela Hathor from online trading platform Capital.com, said the vote split will be closely monitored, and markets will be looking for any rise in the number of members voting for a cut, which could suggest that the MPC is edging closer to further easing rates.
“A shift toward a more divided committee would likely be interpreted as a dovish undercurrent, even if the headline decision remains unchanged.
“Conversely, a broadly unified vote to hold rates steady would suggest the BoE remains uncomfortable with inflation dynamics, particularly in the labour market, and is willing to maintain restrictive policy for longer,” she said.
Rise in borrowing costs as Starmer's leadership under pressure over Mandelson scandal
11:03 , Harriette BoucherBritish borrowing costs have risen today as investors question whether Keir Starmer can survive his handling of former UK ambassador to the US Peter Mandelson and his links to paedophile Jeffrey Epstein.
Longer-dated British government bond yields rose for a second day on Thursday, while European borrowing costs remained flat.
Ten-year gilt yields rose to the highest since 20 November, up about 3 basis points to 4.6 per cent and were last up around 4 bps.
Thirty-year bond yields touched the highest since Budget Day on 26 November, also up around 3 bps at 5.4 per cent.
UK Consumer Price Index at 3.4% for December
10:36 , Harriette BoucherAs for that 2% inflation target, the chart below shows we are generally headed back towards it, but still with work to do.
This is UK CPI - which was at 3.4% for December.
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How interest rates affect inflation
10:19 , Harriette BoucherThe Independent's Business and Money Editor Karl Matchett:
The link between interest rates and inflation is a complex one, and not the only factor in the slightest which impacts the MPC's decision, but it's an important part of the puzzle.
In brief and simple terms, when interest rates are down, people tend to have more money to spend because mortgage repayments are lower, and it's cheaper to borrow money for other loans as repayments are lower - so they are more likely to spend on bigger-ticket items.
That means businesses have more income, so are more likely to invest in their own projects including hiring personnel, which again leads to more money in pockets...but it also means demand is higher for goods and services, which can push prices higher. That is, of course, exactly what inflation is: prices going up.
When interest rates are high the opposite happens: less borrowing, higher costs, lower spending, lowered demand. So striking the balance between all this is part of what goes into deciding what level interest rates should be at, to support a growing economy - but not at the expense of high inflation.
There is a government-set 2% target for inflation, which is seen as ideal to grow an economy without goods and services becoming overly expensive too quickly for the majority of the population.
What will today's announcement mean for savers?
09:55 , Harriette BoucherIf interest rates hold today, as is widely expected, it will be good news for savers, as returns on easy-access and variable accounts are unlikely to immediately fall.
Maike Currie, VP of personal finance at PensionBee, said: “It’s a big week for central banks, with interest rate decisions from the Bank of England and the European Central Bank, alongside fresh scrutiny of the US Federal Reserve following last week’s nomination announcement of a new Fed Chair.”
The pension provider said that despite the changes announced to the Cash ISA in the November Budget, which saw the allowance for individuals under 65 reduced from £20,000 to £12,000 from April 2027, savers were still stashing record amounts into their Cash ISA.
According to the Bank of England’s latest money and credit report in December, savers added £5.2 billion to cash ISAs and £5.1 billion to interest-paying easy-access accounts.
Tamsin Powell, Consumer Finance Expert at Creditspring, said: “Anyone with cash set aside can still make their money work harder while inflation continues to cool.
“For households that have been able to build even a small buffer, this period of stability offers a chance to pause, review finances, and plan ahead with a bit more confidence.”
What happens when interest rates rise?
09:37 , Harriette BoucheBarclays strategist expects BoE unlikely to commit to future rate cuts
09:10 , Harriette BoucherThe Bank of England is not likely to commit to the timing of any future interest rate cuts, according to a chief market strategist.
Julien Lafargue at Barclays Private Bank said: “The Bank of England is widely expected to keep interest rates unchanged in February.
“On the back of the Budget, we could see a more benign outlook on the inflation front, at least in the short-term.
“When it comes to forward guidance, the BoE is likely to remain noncommittal about the timing of any future interest rate cuts.
“That said, the combination of lower inflation ahead and continued softening of the UK labour market should reinforce the central bank’s view that the path for monetary policy is towards a lower Bank rate, potentially as early as next month.”
Economists predict interest rates to hold in 6-3 split
08:49 , Harriette BoucherEconomists are forecasting a 6-3 split at today’s Monetary Policy Committee, with the majority of members leaning towards holding interest rates.
Thomas Pugh, chief economist at audit, tax and consulting firm RSM UK, said: “Growth picked up in November, and surveys suggest a strong start to the year, which will be enough to keep the MPC on hold despite a continued loosening in the labour market.
“The guidance will probably continue to indicate more cuts are likely but will be increasingly cautious on the timing and number of additional rate cuts needed.”
Mr Pugh said the MPC will be more cautious about future rate cuts and expects just one cut this year in April.
“That said, if the labour market continues to weaken, and that weakness translates into a faster-than-expected slowdown in pay growth then the MPC could be convinced to cut further.”
Pound slightly weaker against the US Dollar in early trading
08:31 , Harriette BoucherThe pound is slighter weaker than the US Dollar, down a third of a cent at around $1.3620.
At its lowest level in nearly two weeks, the pound has come under pressure ahead of the interest rate decision later today.
How inflation rebound is set to affect UK interest rates
08:16 , Harriette BoucherInterest rates are widely expected to remain at 3.75% as Bank of England policymakers prioritise curbing above-target inflation while also monitoring economic growth, according to expert analysis.
The Bank’s Monetary Policy Committee (MPC) is anticipated to leave borrowing costs unchanged when it announces its latest decision on Thursday, marking its first interest rate setting meeting of the year.
This follows a rate cut delivered before Christmas, which was the fourth such reduction.
At the time, Governor Andrew Bailey noted that the UK had "passed the recent peak in inflation and it has continued to fall", enabling the MPC to ease borrowing costs. However, he cautioned that any further cuts would be a "closer call".
Since that decision, official data has revealed that inflation unexpectedly rebounded in December, rising for the first time in five months.
Getting a mortgage soon? It's not just about interest rates
07:57 , Karl MatchettOne of the big groups of people who will keep a keen eye on the rates decision is anyone getting, or renewing, a mortgage soon.
But the headline rate isn’t the only thing which matters when it comes to that decision, of course.
Aaron Shinwell, chief lending officer at Nottingham Building Society, explains why now might be a good time - and what else you need to look for.
“Mortgage rates are now at their lowest levels since 2022, creating real opportunities for anyone looking to buy or remortgage. Rates have already passed their peak and could gradually edge down over time, which good news for the 1.8 million borrowers expected to remortgage this year and first-time buyers finding a more realistic route onto the property ladder.
“Small shifts in expectations around future base rate reductions are already influencing mortgage pricing and we anticipate modest downward movements in rates through 2026, which should help support demand.
“Getting the right mortgage isn’t just about chasing the lowest headline rate. Term length, overpayment flexibility and long-term affordability all matter. Engaging early with a broker can make a real difference whether that’s securing a mortgage offer now while keeping the flexibility to switch if better options appear before completion.”
Will interest rates go down today? Key factors and 2026 predictions
07:48 , Karl MatchettThe Bank of England’s (BoE) next meeting to determine interest rates is on Thursday 5 February and all eyes will be on the Monetary Policy Committee (MPC) and whether its members opt to continue lowering rates.
The base rate - now at 3.75 per cent after being cut four times last year – impacts business, consumers and taxpayers through everything from mortgages to loans and savings, so what do experts foresee, both this week and beyond?
Here’s everything you need to know ahead of today, including the key factors which impact interest rates decisions.
Will interest rates go down today? Key factors and 2026 predictions
Interest rates vote: Key details
07:29 , Karl MatchettA bit of detail then for what happens today and what to expect.
What: The MPC members vote whether to cut, hold or raise interest rates.
Who: There are nine members in the Monetary Policy Committee (MPC) and it’s “most votes wins” - last time out was 5-4 in favour of a cut, for example. Andrew Bailey, the BoE governor, is one of the nine.
Time: At midday the vote results and meeting minutes will be published.
What next: Often it can be the press conference afterwards, or the detail within the written vote explanation, which can give the greatest insight as to what might happen in future: caution, what they want to see in economic data, expectations and so on.
Base rate, bank rate....interest rates
07:25 , Karl MatchettToday you’ll see variations of the same thing: what we typically call the interest rate. Officially it’s the Bank Rate (the rate the Bank of England sets) and it’s what the BoE itself calls the “core interest rate”.
You might also see the term “base rate”, which again is the same thing: all other banks and building societies base their rates off the bank rate.
So here’s how we got to 3.75 per cent over the past few years:
Note the quarterly reductions over the past year and a half, bringing us down from the high of 5.25 per cent.
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Bank of England set for first vote of 2026 on interest rates
07:08 , Karl MatchettGood morning all and welcome to The Independent’s live coverage of the run-up to the Bank of England’s first interest rates vote of 2026.
We had four cuts last year, bringing the base rate down to 3.75 per cent - good news for those renewing their mortgage deals after a couple of years at much higher levels, but not such good news for savers seeking higher returns on their cash.
All the details coming up, plus the reaction after the vote itself.
