The Bank of England held its base interest rate at 4% on Friday, November 6, 2025 — a decision that brought little relief to millions of British households still wrestling with some of the highest mortgage costs in a generation. Despite inflation falling to 3.6%, well below its 11% peak in 2022, it remains stubbornly above the Bank’s 2% target. The move, announced after a meeting of the Monetary Policy Committee (MPC), signals a pause in the central bank’s gradual easing cycle — and a warning that the fight against inflation isn’t over.
Why Hold When Inflation Is Falling?
It’s a question many homeowners are asking. After five rate cuts since November 2024 — starting from 5.25% — the MPC could’ve been expected to lower rates again. But Andrew Bailey, the Governor of the Bank of England, was clear: "Inflation has come down a long way... but it remains too high." The committee fears that cutting too soon could reignite price pressures. If people start spending more as loan payments dip, businesses may raise prices again. "When demand is high, businesses often raise their prices," the Bank warned in its minutes. It’s a delicate dance: too much easing risks inflation returning; too little risks pushing households and businesses into deeper hardship.
Mortgage Rates: A Stark Reality Check
For homeowners, the real pain isn’t the base rate — it’s what lenders charge. As of November 2025, the average 2-year fixed-rate mortgage sits at 4.66% across all lenders, while the "big six" banks offer slightly better deals at 3.96%. The 5-year fixed rate averages 5.04%, still far above pre-pandemic levels. But the real shocker? The standard variable rate (SVR) — what millions land on after their fixed term ends — is just below 8%. That’s more than double what many secured during the 2020-2021 low-rate era.
"We’re seeing families who remortgaged in 2022 at 2.5% now facing payments that are 120% higher," said L&C Mortgages, a UK-wide broker working with Which? Ltd. "It’s not just affordability — it’s psychological. People are terrified to move." Tracker mortgages, which directly follow the Bank of England’s base rate, are the only ones that would benefit from a future cut — but even then, lenders often add hefty margins.
The Long Road Back: From 5.25% to 4%
It’s easy to forget how far we’ve come. Between late 2021 and August 2023, the Bank of England raised rates 14 times in a row — the fastest tightening cycle in modern history — to crush inflation fueled by supply shocks, energy spikes, and post-pandemic spending. Rates peaked at 5.25%. Since then, inflation has cooled, thanks in part to falling energy prices and reduced consumer demand. In September 2024, CPI dropped below 2% for the first time since early 2021, triggering the first cut in over two years. Since then, the MPC has cut rates in November 2024, February, May, and August 2025 — each by 0.25 percentage points.
"We’ve been able to cut rates five times," Bailey noted. "But we’re not out of the woods." The Bank’s forecast now expects inflation to fall to 2.1% by early 2026 — close enough to target to justify another cut, but only if the data holds. The next MPC meeting is on December 18, 2025London. Markets are pricing in a 60% chance of a 0.25% cut then.
Chancellor Reeves’ Fiscal Tightrope
While the Bank of England manages monetary policy, the Rachel Reeves, Chancellor of the Exchequer, holds the fiscal reins. And she’s under pressure. With mortgage payments eating up 40% of median household income in London and the Southeast — up from 28% in 2019 — voters are demanding relief. But Reeves can’t just hand out cash. The Office for Budget Responsibility (OBR) warned in October that public debt remains at 99% of GDP, and any major spending spree could spook bond markets.
Her best tool? Targeted support. That could mean expanding the Energy Price Guarantee, extending help for first-time buyers, or reforming the Help to Buy scheme. But it’s politically fraught. "The Bank is doing its job by keeping inflation contained," said NatWest’s chief economist in an internal briefing. "But if households are too squeezed to spend, the economy stalls. That’s her problem to solve. Not ours."
What’s Next? The Next Cut Could Be the Toughest
The Bank’s guidance suggests another cut is likely — but only if inflation continues to fall without wage growth reigniting. The key indicator? The services inflation measure, which remains sticky at 4.3%. That’s the part of inflation tied to labor costs — and it’s the hardest to tame without unemployment rising.
"We’ll need to see at least two more months of cooling services data before we can be confident," said one MPC insider, speaking anonymously. "One bad jobs report, and we’re back to holding." Meanwhile, lenders are quietly preparing for a wave of remortgaging in early 2026, when the next batch of 2-year fixed deals expire. Uswitch reports that 1.2 million UK households will hit their fixed-term end by March 2026 — most facing SVRs near 8%.
Why This Matters to You
If you’re on a tracker mortgage, your payments will drop when the Bank cuts again — but not until December at the earliest. If you’re on a fixed rate, you’re safe for now. But when your term ends, you’ll face a brutal choice: lock in at 4.5% to 5.5%, or roll onto an SVR that could cost you £800 extra a year. And if you’re a first-time buyer? The average deposit needed to get a mortgage today is £68,000 — up from £41,000 in 2020. The dream is still alive, but it’s getting harder to reach.
Frequently Asked Questions
Why didn’t the Bank of England cut rates even though inflation is falling?
The Bank is wary of cutting too soon because services inflation — driven by wages and rent — remains stubbornly high at 4.3%. A premature cut could boost spending, leading businesses to raise prices again. The MPC wants to see at least two more months of consistent cooling before acting, to avoid reigniting inflation.
How do current mortgage rates compare to historical levels?
As of November 2025, the average 2-year fixed mortgage is 4.66%, up from 2.1% in early 2021. The standard variable rate (8%) is nearly triple the 2.8% average seen in 2019. Even the "big six" lenders’ best rates are 0.8% higher than pre-pandemic norms, meaning monthly payments are still significantly heavier than a decade ago.
What’s the difference between a tracker and a fixed mortgage?
A tracker mortgage directly follows the Bank of England’s base rate, usually with a small markup — so if the base rate drops, your payment drops too. Fixed-rate mortgages lock in your payment for a set term (2 or 5 years), regardless of base rate changes. Once the term ends, you typically move to a variable rate, often the lender’s SVR — which is currently around 8%.
When is the next interest rate decision, and what are the odds of a cut?
The next Bank of England MPC meeting is on December 18, 2025. Markets currently price in a 60% chance of a 0.25% cut, assuming inflation continues to fall and wage growth remains moderate. A strong jobs report or renewed inflation spike could delay the cut until early 2026.
How is Chancellor Rachel Reeves responding to the mortgage crisis?
Reeves has signaled a focus on targeted, not broad, fiscal support — including potential reforms to Help to Buy, expanded energy bill assistance, and pilot programs for first-time buyers in high-cost areas. She’s avoiding large-scale subsidies to prevent fueling inflation. Her Autumn Statement in November 2025 is expected to outline these measures.
What happens if inflation doesn’t fall as expected?
If inflation stalls above 3% into early 2026, the Bank of England may pause further cuts — or even signal a rate hike. That would mean mortgage holders could face renewed pressure, especially those on SVRs. The Bank has said it’s prepared to act "if necessary" — meaning the door isn’t closed on raising rates again, even after five cuts.