Will UK interest rates fall any time soon?

Will UK interest rates fall any time soon?
The Bank of England held interest rates at 3.75% at its latest meeting, keeping them at the lowest level since February 2023.
Rates were cut from 4% in December, but the economic impact of the war in Iran has reversed expectations among many analysts of further reductions this year.
Interest rates affect mortgage, credit card and savings rates for millions of people.
What are interest rates and why do they change?
An interest rate tells you how much it costs to borrow money, or the reward for saving it.
The Bank of England's base rate is what it charges other banks and building societies to borrow money, which influences what they charge their own customers for mortgages as well as the interest rate they pay on savings.
The Bank moves its benchmark rate up and down in order to keep UK inflation - the rate at which prices are increasing - at or near 2%.
When inflation is above that target, the Bank typically puts rates up. The idea is to encourage people to spend less, reducing demand for goods and services and limiting price rises.
What has been happening to UK interest rates and inflation?
The main inflation measure, CPI, has dropped significantly since the high of 11.1% recorded in October 2022.
It was 3% in the year to January 2026 - down from 3.4% in December.
The Office for National Statistics (ONS) - which measures inflation - said the fall was driven by lower fuel, food and flight prices.
However, there are now predictions of the inflation rate rising again.
The Bank of England's base rate reached a recent high of 5.25% in 2023. It remained at that level until August 2024, when the Bank started cutting.
Five cuts brought rates down to 4%, before the Bank held rates at its meetings in September and November 2025, before the December cut and further holds in January and March 2026.
Are interest rates expected to fall again?
Until a few weeks ago, the Bank was widely expected to cut interest rates twice this year, with the first either at its meeting in March or at its next gathering in April.
However, the outbreak of the US-Israeli war with Iran has upended all of this.
Many analysts think any chance of a rate cut this year has gone. Some are instead expecting a rate rise later in the year.
However, the weakness of the UK's jobs market and sluggish economic growth means a rate rise is by no means certain either.
Unusually, the vote among the nine members of the policy committee that sets rates was unanimous in March, with all backing the decision to wait and "assess how events unfold", and there was talk among the committee of the next move being a rise in rates.
How do interest rate cuts affect mortgages, loans and savings rates?
Mortgages
Just under a third of households have a mortgage, according to the government's English Housing Survey.
About 500,000 homeowners have a mortgage that "tracks" the Bank of England's rate, any cut sees a reduction in the monthly repayments on an outstanding loan.
An additional 500,000 homeowners on standard variable (SVR) rates rely on their lender passing on any Bank rate cut.
But the vast majority of mortgage customers have fixed-rate deals. While their monthly payments aren't immediately affected by a rate change, future deals are.
As of 19 March, the average rate on a new two-year fixed deal had jumped from 4.83% at the start of March to 5.32%, its highest since last February, according to the financial information service Moneyfacts.
For those looking for a five-year deal, the average rate has gone up from 4.95% to 5.37% over the same period and is now at its highest level since August 2024.
The average two-year tracker rate was 4.50%.
About 800,000 fixed-rate mortgages with an interest rate of 3% or below are expected to expire every year, on average, until the end of 2027. Borrowing costs for customers coming off those deals are expected to rise sharply.
Mortgage calculator
You can see how your mortgage may be affected by future interest rate changes by using our calculator:
Credit cards and loans
Bank of England interest rates also influence the amount charged on credit cards, bank loans and car loans.
Lenders can decide to reduce their own interest rates if Bank cuts make borrowing costs cheaper.
However, this tends to happen very slowly.
Savings
The Bank base rate also affects how much savers earn on their money.
A falling base rate is likely to mean a reduction in the returns offered to savers by banks and building societies and vice versa.
As of 19 March, Moneyfacts said the average rate for an easy access savings account ws 2.45%.
Any cut in rates could particularly affect those who rely on the interest from their savings to top up their income.
What is happening to interest rates in other countries?
In recent years, the UK has had one of the highest interest rates in the G7 - the group representing the world's seven largest so-called "advanced" economies.
In June 2024, the European Central Bank (ECB) started to cut its main interest rate for the eurozone from an all-time high of 4%.
At its meeting in June 2025 the ECB cut rates by 0.25 percentage points to 2% where they have remained.
The US central bank - the Federal Reserve - has cut interest rates three times since September 2025, taking them to the current range of 3.5% to 3.75%, the lowest since 2022. It held rates at its March 2026 meeting.
President Trump had repeatedly attacked the Fed for not cutting earlier. Trump has picked Kevin Warsh to lead the Fed when current chairman Jerome Powell's four-year term ends in May.