Bank of England Base Rate Update: September 2025
The Bank of England has announced its latest decision on the base rate, a key figure that affects mortgages, loans, and savings. In September 2025, the base rate has been kept at 4%, with the Monetary Policy Committee (MPC) voting by a majority of 7–2 to maintain this rate. This decision comes as the economy continues to stabilise following previous periods of high inflation and economic uncertainty.
If you’re thinking about getting a mortgage, remortgaging, or considering your financial plans, understanding what this decision means can help you make better choices.
What is the base rate and why does it matter?
The base rate is the interest rate set by the Bank of England. It influences how much banks and lenders charge for mortgages and loans and how much interest they pay on savings.
- When the base rate goes up, borrowing usually becomes more expensive.
- When it goes down, borrowing is cheaper, but savings interest rates tend to fall.
The Bank of England base rate has an effect on mortgage lenders, and a change can directly affect your monthly payments. Even if you have a fixed-rate mortgage now, today’s decision could impact the rates available when your fixed deal ends.
September 2025 decision
At the meeting ending on 17 September 2025, the MPC decided to keep the base rate at 4%. Seven members voted to hold the rate steady, while two voted to reduce it slightly to 3.75%.
The decision was made because:
- Inflation, which measures how quickly prices are rising, has been falling gradually.
- Consumer Price Index (CPI) inflation was 3.8% in August and is expected to rise slightly in September before moving closer to the target of 2% over time.
- The economy is still showing signs of weakness, with slow growth and reduced consumer spending.
This balance means that while inflation is coming down, there are still concerns about the cost of living and the risk of slowing the economy too much by cutting rates too quickly.
Inflation and its role in the decision
Inflation plays a central role in setting the base rate. The Bank of England’s target for inflation is 2%, as this level is seen as healthy for the economy.
Key points on inflation this month:
- CPI inflation was 3.8% in August and is expected to peak briefly at 4% in September.
- Food prices and services, such as transport and hospitality, are keeping inflation higher than desired.
- Wage growth has started to slow, which helps reduce pressure on prices over time.
By keeping the base rate at 4%, the Bank aims to continue encouraging inflation to fall steadily while avoiding sudden shocks to the economy.
What this means for mortgages
If you have a mortgage or are looking to get one, this decision can affect you in different ways:
Fixed-rate mortgages
If you are on a fixed-rate mortgage, your monthly payments won’t change immediately. However, when your deal comes to an end, the rate you move to will depend on the base rate at that time and the deals lenders are offering.
Tracker or variable-rate mortgages
If you have a tracker mortgage, which follows the base rate, your payments remain the same for now because the rate has not changed. The same applies to most variable-rate mortgages, although some lenders may make changes independently.
New mortgage applications
For those looking to buy a home or remortgage, mortgage rates may remain stable for the time being. However, lenders still factor in future expectations when setting their rates, so deals can change even if the base rate stays the same.
Speaking with a mortgage adviser can help you understand the options available and find a deal that suits your circumstances.
Economic outlook and what’s next
The Bank of England’s report shows that while inflation is falling, the economy is still facing challenges:
- Growth remains slow, with businesses and households cautious about spending.
- Employment growth has been weak, and some industries are reducing hiring plans.
- Global events, such as changes in trade policies and tariffs, continue to create uncertainty.
The Bank has made it clear that future changes to the base rate will depend on how inflation and the wider economy develop. Rates could go down if the economy weakens, but they could also stay the same for longer if inflation remains above target.
How this could affect you
The decision to keep the base rate at 4% highlights the importance of planning ahead. Even a small change in interest rates can make a big difference to your monthly mortgage payments over time.
Here are a few steps you might consider:
- Review your current mortgage deal and check when it’s due to end.
- Consider speaking with a mortgage adviser before your deal expires to explore your options.
- If you’re looking to buy a property, understand how much you can afford and how future rate changes might impact your budget.
- Look at ways to reduce other financial pressures, such as overpaying your mortgage when possible or reviewing protection policies.
Why professional advice matters
With the base rate holding steady but economic uncertainty remaining, it’s more important than ever to get tailored advice. A mortgage adviser can help you:
- Find the best mortgage deals based on your circumstances.
- Understand how potential rate changes could affect your repayments.
- Plan for the future with suitable protection policies to safeguard your home and family.
At Kerr & Watson, we specialise in helping people navigate these changes with clear, straightforward advice. Whether you’re buying your first home, moving, or remortgaging, we’re here to help you make informed decisions.
Conclusion
The Bank of England’s decision to keep the base rate at 4% in September 2025 shows that while progress has been made in reducing inflation, there are still challenges ahead for the economy.
For homeowners and buyers, this means mortgage rates may remain stable for now, but future changes are still possible. By staying informed and seeking expert advice, you can take control of your financial situation and make the best decisions for you and your family.
If you’d like to discuss how this update might affect your mortgage or future plans, get in touch with us today at Kerr & Watson.
Read more: Bank Rate maintained at 4% – September 2025
