Base rate held at 4% – here's what it means and when it might be cut next

The base rate is used by the central bank to charge other banks and lenders when they borrow money – so it influences what borrowers pay and what savers earn.

It's also used by the Bank of England as a tool to control inflation (the rate at which prices rise). The Bank has a target – set by the Government – of 2% for the Consumer Prices Index (CPI) measure of inflation. The latest figures show that CPI inflation was 3.8% in the 12 months to August this year – above the Bank's target.

Why the base rate was held

The Bank's Monetary Policy Committee (MPC), which determines the rate, said it "remains focused on squeezing out any existing or emerging persistent inflationary pressures". The MPC voted as follows:

• Seven members, a majority, voted to keep the rate at 4%;

• Two members voted for a cut to 3.75%.

Commenting on the factors at play in the Bank's decision, Laith Khalaf, head of investment analysis at investment platform AJ Bell, said: "The UK has an inflation problem, which is keeping the Bank of England in cautious mode on interest rates. While inflation is nowhere near as bad as it was, prices are still rising at an uncomfortable pace."

Aaron Strutt of mortgage broker Trinity Financial, added: "Bank of England governor Andrew Bailey recently stressed that there is a huge amount of economic uncertainty at the moment and concern in the money markets. The MPC doesn't want to cut the base rate too quickly and then have to put it back up again."

Another base rate cut looks unlikely this year

David Hollingworth, of broker L&C Mortgages, said: "There's still hope that there will be further interest rate cuts to come, but the timescale on when those cuts may be applied are shifting. While another cut this year could still happen, it's more in the balance than it looked only a few months ago."

Mr Strutt said: "Another base rate cut this year seems quite unlikely unless the MPC sneaks one in just before Christmas, as we have seen them do before."

Ben Thompson, of broker Mortgage Advice Bureau, agreed: "Inflation remains stubborn – if and when it shows clear signs of receding, and provided economic growth remains soft by then, the base rate will reduce. Until then, it's becoming more likely we won't see a reduction from the current base rate level in 2025."

Brokers expect only slight changes to fixed mortgage deals

Nicholas Mendes, of broker John Charcol, said: "A hold was already priced in by lenders, so I do not expect major reductions or a new wave of competitive repricing before the next couple of MPC meetings. Best buy fixed rates are likely to move sideways with only modest tweaks. The shift away from regular meeting-by-meeting base rate changes towards a longer pause should help keep fixed rates steadier in the near term."

Mr Strutt said: "The cost for lenders of funding fixed rates has been fluctuating recently and there have been some price increases. They have not been huge but they are enough for people to notice the difference to the monthly repayments. It would not be a surprise if we saw a few more fixed rate price rises soon – so if you spot a rate you like, take steps to secure it."

On your lender's SVR? You can likely save £1,000s with a new deal

A standard variable rate (SVR) is the rate you pay once your current mortgage deal comes to an end. SVRs have a variable rate of interest, which means the rate can change at any time.

SVRs are normally far more expensive than the best fixed or tracker deals – right now, a typical SVR is around 6.5% to 7.5%, while the top two- and five-year fixed rates start from 3.8% and 4% respectively. So if you're on an SVR, you should consider switching to a new deal now – see our Cheap mortgage finding guide.

Some savings rates have dropped slightly – but you can still find a good deal

Since the base rate was cut last month, the top savings rates available on easy-access accounts have dropped slightly, as have rates on the top one-year fixes. But it's still crucial to check your interest now. Millions are on pants rates, and can easily and simply move their money to where it pays more. And if you're on a fix, diarise to act before it ends.

Currently, the top easy-access rate is for newbies to app-only bank Chase at 4.75% variable. The next best rate is from Santander-owned Cahoot at 4.4%. Both these rates are variable, so you'll need to keep an eye on them.

If you're worried about rates dropping and can lock money away, you might want to consider a fixed-rate account. Right now you can lock in for a year at 4.46% with Castle Trust Bank, or for two years at 4.43% with JN Bank.

For full info and lots more options, see our Top savings accounts guide.