Bank of England holds interest rates at 3.75% for fifth time

The Bank of England is expected to hold its benchmark interest rate at 3.75% for a fifth straight time on July 29, 2026. The Monetary Policy Committee’s decision, due at 12:00 BST, would keep borrowing costs at their lowest since February 2023.

Homeowners with tracker mortgages would see no change in monthly payments, but more than eight in 10 mortgage customers are on fixed-rate deals. Major UK lenders have been raising rates on new offers, pushing the average two-year fixed rate to 5.62%, according to Moneyfacts — the highest in more than a month. David Hollingworth of mortgage broker L&C said that while a hold is welcome, market expectations must ease before lenders start cutting rates again.

The Bank rate is the MPC’s primary tool for hitting the 2% inflation target. Inflation stood at 2.6% in the year to June 2026, down slightly but still above target. It is set to climb in July 2026 as a 13% rise in domestic energy prices, triggered by the Iran war’s impact on wholesale costs, hits millions of households in Scotland, England and Wales. The Gulf conflict and doubts over a truce are clouding the committee’s deliberations.

Katie Horne of savings platform Flagstone said a hold would offer “a welcome dose of stability” amid the new government and Middle East uncertainty. For savers, the top one-year fixed bond pays 4.91%, the highest for new customers since October 2024, which Rachel Springall of Moneyfacts called “a rare dose of good news” after years of poor real returns.

The MPC, which meets eight times a year, has been cautious since rates peaked. Bank of England projections suggest over five million homeowners could see higher monthly repayments by the end of 2028. Many analysts expect rates to remain unchanged in the foreseeable future, with the possibility of a rise rather than a cut.