Who Sets Interest Rates in the UK? What It Means for Your Mortgage

Checked by Suzanne Bradshaw, Director, Mortgage & Finance Arena. Last updated October 2026.

The Bank of England sets the UK’s main interest rate, called Bank Rate. But it does not set your mortgage rate. Your lender does that. This guide explains who sets interest rates, how the decision is made and what a change means for your mortgage.

Key facts

• The Bank of England’s Monetary Policy Committee sets Bank Rate.
• The committee has nine members and meets eight times a year.
• Its main job is to keep inflation at the 2% target set by the government.
• Lenders set their own mortgage rates. Bank Rate is only one of the things they look at.
• A change in Bank Rate hits tracker and variable rates first. Fixed rates stay the same until the deal ends.

Who sets interest rates in the UK?

The Monetary Policy Committee, or MPC, at the Bank of England sets Bank Rate. The MPC has nine members. Five come from the Bank, including the Governor. Four are experts from outside the Bank. Each member has one vote and the majority decides.

The government does not set the rate. It sets the inflation target, and the Bank decides how to meet it. You can see the current rate and the next decision date on the Bank of England website.

How does the Bank decide?

The MPC looks at how fast prices are rising and where it thinks inflation is heading. It also looks at wages, jobs, spending and growth.

• If inflation is too high, the MPC may raise Bank Rate. Borrowing costs more, so people and firms spend less and prices rise more slowly.
• If inflation is low or the economy is weak, the MPC may cut Bank Rate. Borrowing costs less, which can help spending and growth.

Who sets mortgage rates?

Each lender sets its own rates. Bank Rate matters, but lenders also look at:

• What it costs them to borrow money. For fixed rates, this depends on what the markets expect rates to do in the next few years.
• How much they want to lend and how busy they are.
• What other lenders are charging.
• How risky the loan is, such as how big your deposit is.

This is why fixed rates can go up or down before the Bank changes Bank Rate. Lenders often move when they expect a change, not when it happens.

How does a change in Bank Rate affect my mortgage?

It depends on your type of mortgage:

• Fixed rate. Your payment stays the same until your deal ends. The change matters when you look for your next deal.
• Tracker. Your rate follows Bank Rate up or down, usually from the next month.
• Standard variable rate. Your lender can change it when it likes. It often moves when Bank Rate moves, but it does not have to.
• Discount rate. This is a set amount below the lender’s variable rate, so it moves when that rate moves.

As a rough guide, on a £200,000 repayment mortgage over 25 years, a rise of 0.25% adds about £25 to £30 a month.

Where rates stand now (October 2026)

• Bank Rate is 3.75%. The Bank cut it from 4% on 17 December 2025 and has held it there since.
• Inflation is above target. It was 3.1% in August 2026. The target is 2%.
• Some on the committee want a rise. On 17 September 2026 the vote was 6 to 3 to hold. The three others wanted 4%.
• Fixed rates have risen this year. In March 2026, average two-year fixed rates went from 4.84% to 5.01% in under a week, while Bank Rate stayed the same.

The next decision is due on 5 November 2026.

Will mortgage rates go up or down?

Not down soon, on current signs. Earlier this year many people expected more cuts. That changed when conflict in the Middle East pushed up energy prices and inflation.

In September the Bank said that if the conflict lasts and price rises spread to wages, policy may have to tighten. In plain terms, Bank Rate could go up, not down.

Things could change. If energy prices fall back and inflation moves towards 2%, cuts could return. If your deal ends in the next six months, you can secure a rate now and still switch if a cheaper deal comes along before it completes. Try our Remortgage Rate Checker or read about our remortgage advice.

What can I do when rates change?

• Check when your deal ends. Many lenders let you lock in a new rate up to six months ahead.
• Do not drift onto your lender’s variable rate. It is often much higher than a new deal.
• Think about a fixed rate if you want your payments to stay the same.
• Think about a tracker if you expect rates to fall and can cope if they rise.
• Look at your budget so you know what payment you can afford.

Our remortgage rate checker shows what a new deal could cost. You can also read our guide on how a remortgage broker can help.

More questions people ask

Will mortgage rates go down in 2026?

It looks less likely than it did earlier in the year. Inflation is above target and three Bank of England committee members voted for a rise in September.

When is the next Bank of England decision?

5 November 2026.

Should I fix my mortgage now or wait?

Waiting is a gamble. If your deal ends within six months, many people secure a rate now as a safety net. A broker can review it before it completes.

Talk to our team

We compare deals from across the market and explain your options in plain English. Call us on 01332 300300 or request a callback.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Next steps: Check your options with our remortgage rate checker or read about a product switch.