UK Interest Rates 2026: Could They Rise Again?

UK Interest Rates 2026: Could They Rise Again?

UK interest rates were widely expected to fall further in 2026. Instead, the Bank of England held its base rate at 3.75% in April 2026 — and has now warned that the next move could be upward. The trigger is the economic fallout from the US-Israel war with Iran, which has pushed up global oil and energy prices and raised the prospect of higher inflation in the UK.

For households with mortgages, savings accounts, or credit card debt, understanding what is happening to UK interest rates in 2026 matters directly to your monthly finances.

What's happening

The Bank of England's base rate — the rate it charges banks and building societies to borrow, which in turn shapes what you pay on mortgages and earn on savings — currently stands at 3.75%. That is the lowest it has been since February 2023.

Rates peaked at 5.25% in 2023, then fell through five cuts to reach 4% by December 2025. A further cut in December brought the rate to 3.75%, and the Bank held at that level in January, March, and April 2026.

Two further cuts had been forecast for 2026. Those expectations have now been upended. The outbreak of the US-Israel war with Iran has driven up global energy prices — Brent crude reached $126 a barrel in the hours before the Bank's April meeting. UK inflation (measured by CPI) rose to 3.3% in the year to March 2026, up from 3% in February, driven by higher fuel costs, airfares, and food prices.

The Bank of England held rates in April but said there could be "forceful" rises later in 2026 if oil prices remain high. In a worst-case scenario, the Bank indicated up to six increases, potentially pushing the base rate to 5.5%. Governor Andrew Bailey said the Bank would "continue to monitor the situation and its impact on the UK economy very closely."

The next rate decision is on Thursday 18 June 2026.

Why it matters

Interest rates affect the cost of borrowing and the return on saving for millions of UK households. When the base rate rises, mortgage repayments typically increase for those on variable deals, and lenders tend to price new fixed-rate deals higher. When rates fall, savings rates usually follow.

UK inflation has fallen significantly from its peak of 11.1% in October 2022, but at 3.3% it remains above the Bank's 2% target. The Bank's mandate is to bring inflation back to that target, and if energy-driven price rises persist, raising rates is one of its main tools — even if it makes borrowing more expensive for households.

Analysts are cautious about predicting the direction of travel. Higher inflation points toward rate rises, but weak jobs market data and sluggish economic growth create uncertainty. The situation is genuinely unclear, and the Bank itself has not committed to a specific path.

Who is affected

Mortgage holders are most directly exposed. Around 500,000 homeowners have tracker mortgages that move automatically with the base rate. A further 500,000 are on standard variable rate (SVR) deals, where lenders can choose whether to pass on changes. The majority — around 87% of mortgage customers — are on fixed-rate deals, so their current monthly payments are not immediately affected. However, approximately 800,000 fixed-rate mortgages with rates of 3% or below are expected to expire every year on average until the end of 2027. Those households face significantly higher rates when they remortgage.

As of 30 April 2026, the average two-year fixed mortgage rate was 5.79%, up from 4.83% at the start of March 2026, according to Moneyfacts. The average five-year fixed rate was 5.69%, up from 4.95% over the same period.

Savers are also affected. The average easy access savings account rate was 2.47% as of 30 April 2026, according to Moneyfacts. If rates rise, savings rates may improve — but if the Bank holds or cuts, returns on cash savings are likely to remain modest.

Credit card and loan holders will find that any base rate rise tends to feed through slowly into the rates charged on unsecured borrowing.

What to do next

• If you are on a tracker or SVR mortgage, check your lender's terms so you understand how a rate change would affect your monthly payment. Use a mortgage calculator to model different scenarios.
• If your fixed-rate deal is ending in 2026 or 2027, start comparing new deals early. Rates have risen sharply since early March 2026, and locking in sooner rather than later may limit your exposure — though this depends on your individual circumstances.
• If you are a saver, compare easy access and fixed-term savings rates now. With the base rate at 3.75% and uncertainty ahead, it is worth checking whether your current account is paying a competitive rate. You can compare savings rates alongside household bills at Taupia to see if switching could improve your returns.
• Watch the 18 June 2026 Bank of England decision for the clearest signal of where rates are heading for the rest of the year.

If you are unsure how any of these changes affect your specific mortgage or savings product, consider speaking to a regulated financial adviser.

Sources

• BBC News: What is expected to happen to UK interest rates? — primary source, published 29 April 2026
• Moneyfacts mortgage and savings rate data cited via BBC News (figures as of 30 April 2026)