Bank of England Holds Rate at 3.75% — What It Means for Mortgage Borrowers

The February 2026 Decision

On 5 February 2026, the Bank of England's Monetary Policy Committee (MPC) voted to hold the Bank Rate at 3.75%. The decision came down to a knife-edge 5-4 vote — far closer than the 7-2 or 6-3 majority that most economists had predicted.

The hold follows the December 2025 cut that brought rates down from 4.00% to 3.75%, and represents the sixth reduction since the easing cycle began in August 2024, when the base rate sat at its peak of 5.25%.

For homeowners in Taunton and across Somerset, understanding this decision — and what comes next — is important for making informed choices about mortgages, whether you're buying, remortgaging, or simply reviewing your options.

Where Rates Stand Now

At 3.75%, the base rate is at its lowest level since February 2023. Since the easing cycle began in August 2024, the MPC has delivered six cuts — bringing rates down from the 5.25% peak that persisted through much of 2023 and into 2024.

However, it's worth remembering that the base rate is just one factor influencing the mortgage rates you'll actually be offered. Fixed-rate mortgage pricing is primarily driven by swap rates in the wholesale markets. For a deeper understanding, see our December 2025 mortgage market analysis, and explore our mortgage calculators to model scenarios relevant to your circumstances.

Why the Knife-Edge Vote Matters

The closeness of the vote is significant. Governor Andrew Bailey himself switched position from December, when he had voted for a cut. He said the decision to hold was based on "accumulating evidence" that the economy was not being hit by major new shocks, and that inflation was falling steadily.

The narrow split has led most analysts to expect a rate cut at the next meeting on 19 March. Lindsay James from Quilter described the vote as "much closer than expected" and noted that the Bank's stance has "shifted somewhat, clearly outlining that it expects rates to be cut further based on the current evidence."

Capital Economics noted that two of the five members who voted to hold indicated they could vote for a cut soon, adding further weight to expectations of a March reduction.

The Economic Outlook: Good News and Caution

Governor Bailey described his main message as "one of good news" — inflation is expected to fall to the Bank's 2% target sooner than previously forecast, potentially as early as spring 2026.

The Bank acknowledges that rates are "likely to be reduced further" — it's a question of when, not if. However, rate-setters remain cautious about lingering price pressures in the services sector, such as hotel stays and hospitality, meaning the pace of cuts may be gradual.

The Autumn Budget 2025 continues to influence the economic outlook, with changes to taxation and government spending affecting business confidence and consumer behaviour across Taunton and the wider Somerset economy.

What Comes Next: Rate Cut Expectations

Economists are broadly aligned that further rate cuts are coming — but the era of ultra-cheap borrowing is unlikely to return. The consensus points to 1-3 more cuts this year, which would bring the base rate to a trough of around 3.00% to 3.50%.

This matters for borrowers because it suggests that current mortgage rates — while likely to ease further — won't return to the sub-2% fixed deals that were available just a few years ago. Anyone waiting for dramatically cheaper mortgages before making a move may be waiting indefinitely.

What This Means for Mortgage Borrowers

If You're Coming Off a Fixed Rate

The Bank estimates that two out of five residential borrowers — close to four million people — will face higher repayments in the next few years as they come off fixed-rate deals arranged when rates were significantly lower. The average increase is expected to be around 8% in repayment costs.

If your fixed-rate deal is ending within the next 6-12 months, now is the time to start exploring your options. Many lenders allow you to lock in a new rate several months in advance, giving you protection against potential rate changes. Our comprehensive remortgage guide and latest remortgage deals can help you understand the process.

If You're a First-Time Buyer

While rates aren't going back to pandemic-era lows, the gradual downward trend in the base rate is a positive signal. Each reduction can improve your borrowing capacity — even a small rate cut can add thousands to how much you can borrow. Use our affordability calculator to see how current rates affect your position, and read our first-time buyer guide for comprehensive guidance.

If You're a Buy-to-Let Investor

The combination of falling rates and subdued house prices may present opportunities for buy-to-let investors in Taunton. However, the rise in unemployment and lower growth forecasts warrant caution on rental demand. Lender affordability assessments for buy-to-let remain rigorous, with most requiring rental income to cover 125-145% of mortgage payments.

If You're on a Tracker or Variable Rate

If you're on a tracker mortgage, your rate is directly linked to the base rate, so the hold at 3.75% means no change for now. Those on standard variable rates (SVRs) should review whether they could save by switching to a fixed deal — SVRs are typically the most expensive way to borrow. Our rate calculator can help you compare options.

The Bigger Picture: Why Low Rates Won't Return

It's worth understanding why the very low mortgage rates of 2020-2021 were exceptional rather than normal. As Governor Bailey explained, those rates were "a product of exceptional things going on, starting with the financial crisis" — they reflected extraordinary economic circumstances that required extraordinary monetary policy.

The psychological scarring from the cost-of-living crisis — when energy and food costs surged following the war in Ukraine — continues to influence rate-setters' thinking. The Bank is wary that expectations of higher inflation could become self-fulfilling, particularly through wage demands.

For a broader view of how mortgage rates in Taunton have evolved, and how to find the best deals available today, speak to one of our recommended mortgage advisors.

Key Dates to Watch