Bank of England Base Rate Update: June 2026
The Bank of England has announced that the Base Rate will remain at 3.75% following its June 2026 meeting. The decision was made by a majority vote of 7-2, with two members of the Monetary Policy Committee (MPC) preferring a small increase to 4%.
If you are a homeowner, landlord, first-time buyer or planning to remortgage, this decision is important because the Base Rate influences borrowing costs across the mortgage market.
While inflation has fallen in recent months, uncertainty surrounding global energy prices and economic growth continues to influence the Bank of England’s decisions. In this update, you’ll find a simple explanation of what happened, why the Base Rate was held, and what it could mean for you.
What Happened in June 2026?
At its meeting ending on 17 June 2026, the Bank of England’s Monetary Policy Committee voted to keep the Base Rate at 3.75%.
The vote breakdown was:
- 7 members voted to keep the Base Rate at 3.75%
- 2 members voted to increase the rate to 4%
The committee felt that current interest rates remain high enough to help control inflation while allowing more time to assess how recent economic events affect households and businesses.
Why Did the Bank Hold Rates?
The main reason for holding rates was the balance between falling inflation and ongoing uncertainty.
Inflation has eased from 3.3% in March to 2.8% in May. This is encouraging progress and suggests that previous interest rate rises are continuing to have the desired effect.
However, the Bank remains concerned about:
- Higher energy prices compared to earlier in the year
- Uncertainty surrounding global events in the Middle East
- The possibility that higher energy costs could feed into wider price increases
- The risk of inflation rising again later this year
Although energy prices have fallen from recent peaks, they remain above levels seen before the conflict began, and the Bank believes there is still uncertainty about future movements.
Inflation Is Falling, But The Job Is Not Finished
One of the most positive developments is that inflation continues to move closer to the Bank’s target of 2%.
Recent figures showed:
- CPI inflation at 2.8% in May
- Food inflation falling significantly
- Goods inflation continuing to moderate
- Wage growth showing signs of slowing
Despite this progress, the Bank expects inflation to increase slightly later in the year as higher energy costs continue to filter through to household bills and business expenses.
The Bank’s concern is not simply inflation today, but whether businesses and workers start adjusting prices and wages in response to expectations of future inflation. If this happens, inflation can become more persistent and harder to control.
At the moment, there is limited evidence that this is happening, but policymakers are monitoring the situation closely.
What Is Happening With Energy Prices?
Energy prices remain one of the biggest influences on the economic outlook.
Oil and gas prices rose sharply earlier in the year following conflict in the Middle East. Although prices have eased recently following progress towards a peace agreement, they remain higher than before the conflict started.
The Bank highlighted that:
- Oil prices remain above pre-conflict levels
- Gas prices remain elevated
- Supply chain disruption has increased in some sectors
- Commodity prices such as metals and fertilisers remain higher
Energy costs affect almost every part of the economy. Businesses face higher operating costs, transport becomes more expensive, and household bills increase. These factors can all contribute to inflation.
Because the Bank of England cannot directly control energy prices, its focus is on preventing these higher costs from becoming embedded across the wider economy.
How Is The Economy Performing?
Economic growth remains relatively weak.
While official figures showed growth of 0.6% during the first quarter of 2026, the Bank believes the underlying picture is softer than the headline number suggests.
Recent indicators show:
- Consumer confidence remains subdued
- Business confidence remains weak
- Demand across many sectors has softened
- Growth in services has slowed
- Manufacturing has shown mixed performance
The Bank expects economic growth to remain modest over the coming months.
This weaker economic backdrop is one of the reasons why most MPC members chose not to increase interest rates further.
What Is Happening In The Labour Market?
The labour market is gradually cooling.
Recent data shows:
- Vacancies continue to fall
- Wage growth is slowing compared to previous years
- Businesses are becoming more cautious with recruitment
- Unemployment remains relatively low but has edged higher over time
A softer labour market can help reduce inflationary pressures because businesses are often under less pressure to increase wages aggressively.
The Bank believes this gradual loosening should help support the return of inflation towards its 2% target.
What Does This Mean For Mortgage Rates?
For mortgage borrowers, the decision to hold the Base Rate provides some stability.
However, it is important to remember that mortgage rates are influenced by more than just the Base Rate.
Lenders also consider:
- Future interest rate expectations
- Financial markets
- Funding costs
- Economic conditions
In recent months, mortgage rates have remained higher than many borrowers were hoping for because financial markets have adjusted expectations around future rate reductions.
The Bank noted that mortgage rates remain significantly higher than they were before recent global events increased uncertainty.
If inflation continues to fall and economic conditions remain subdued, markets may become more confident that future rate reductions are possible. However, there is no guarantee of when this might happen.
What Could Happen Next?
The Bank of England has made it clear that future decisions will depend on incoming data.
Key areas being monitored include:
- Inflation levels
- Energy prices
- Wage growth
- Employment figures
- Consumer spending
- Business confidence
If inflation remains under control and the economy continues to weaken, there could be scope for lower interest rates in the future.
However, if energy prices rise again or inflation proves more persistent than expected, rates could remain higher for longer.
The Bank has stressed that it is prepared to act if necessary to keep inflation on track to return sustainably to its 2% target.
What Should You Do If You Have A Mortgage?
Every mortgage situation is different.
If your fixed rate is ending soon, you may be wondering whether to secure a new deal now or wait. If you are buying your first home, moving house or considering a remortgage, understanding how interest rate changes affect your options is important.
Mortgage lenders continue to update their products regularly, and opportunities can appear even when the wider market remains uncertain.
Speaking to a mortgage adviser can help you understand:
- Which deals are available to you
- How much you could borrow
- Whether remortgaging now makes sense
- How future rate changes may affect your plans
- Ways to keep your monthly payments manageable
Conclusion
The Bank of England has chosen to keep the Base Rate at 3.75% in June 2026 as inflation continues to move closer to target and economic growth remains subdued.
While the decision provides some welcome stability, uncertainty surrounding energy prices and the wider economy means the outlook remains unclear. The Bank will continue to monitor inflation, wage growth and global developments before making future decisions.
If you are considering a mortgage, remortgage or reviewing your current arrangements, professional advice can help you understand your options and make informed decisions based on your circumstances.
For personalised mortgage and protection advice, contact Kerr & Watson and speak with one of our experienced advisers today.
Read More: Monetary Policy Committee Summary and Minutes, June 2026
