What are UK interest rates currently?
The Bank of England base rate is 3.75%.
The base rate set by the Bank of England is used by other banks to set their own interest rates. Interest rates are used to calculate the cost of borrowing (e.g. loans and mortgages) as well as the interest paid on savings (e.g. current accounts and savings accounts). This means the Bank of England base rate has huge influence over the finances of the UK.
Why have rates fallen over the past year?
After a period of consistent interest rate rises linked to energy prices and overall inflation, the Bank of England cut the base rate for the first time in four years in August 2024.
Since then, rates have been cut five times, landing at 3.75% in December 2025. The base rate has remained unchanged since then, but current world events are causing more uncertainty for 2026.
What do high interest rates mean for mortgages?
While rates have fallen in recent months, they're still higher than you might have been paying if you'd taken out a mortgage a few years ago. But the impact of interest rate changes will differ based on which type of mortgage you have:
Fixed-rate mortgage
If you’re on a fixed-rate mortgage, you won't be impacted by higher interest rates until the end of your deal. This might have been set at two or five years, for example.
But once your fixed term ends, you’ll automatically be moved to your mortgage lender’s standard variable rate (SVR), which will likely be much higher, unless you remortgage.
And you may find that, even if you remortgage to one of the better deals on the market, you'll be paying more than you were before.
Discounted, tracker or SVR mortgage
A discounted mortgage is a deal that offers a fixed discount on the lender’s standard variable rate (SVR). For example, if the SVR was 6.5%, your mortgage could have a fixed discount of 1%, meaning you paid 5.5%.
However, if the standard variable rate then changed, your mortgage rate would change in line with this. So, for example, if the SVR rose to 7%, your discounted rate would rise to 6%.
Tracker mortgages are another type of variable-rate mortgage, but they’re usually linked to the Bank of England base rate. As an example, a tracker mortgage could be set 1% above the base rate.
In December 2021, this would have meant your mortgage rate would be 1.1%. But in December 2025, with the base rate at 3.75%, it would have been 4.75%.
If you’re on a standard variable rate (SVR) mortgage, your mortgage rate could change at any time. This means your monthly payments could go up or down over the course of your mortgage term.
SVR mortgages are usually very expensive so it could make sense to remortgage to a new deal unless you're moving home soon or have nearly paid off your entire mortgage.
Interest-only or repayment mortgage
With an interest-only mortgage, you only repay the interest on the loan. This means you’re not repaying the capital during the term of the mortgage, unless you make an overpayment or switch mortgage types. Because you’re not repaying the capital of the loan, your monthly repayments will usually be lower than a repayment mortgage.
With an interest-only mortgage, you pay interest on the same balance for the full mortgage term (unless you make an overpayment on the original capital). At the end of the term, you must repay the balance in full.
With a repayment mortgage, you’re repaying both the interest and capital on the loan. This means, if, for example, your mortgage is £200,000 at 6% over 30 years, a portion of your £1,199 monthly payment would go towards paying off the £200,000, while the rest would be paying the interest on that balance.
Over the course of the mortgage term, the proportion of interest you’re paying will decrease, as you continue to pay off more of the balance.
How do interest rates affect monthly mortgage payments?
If the rise in interest rates has caused your mortgage rate to rise, your monthly mortgage payments will also cost more.
Here’s a breakdown of how much more a repayment mortgage could cost each month, based on the mortgage rate increasing:
Mortgage balance | 2% mortgage rate | 4% mortgage rate | 6% mortgage rate |
|---|---|---|---|
£100,000 | £424 | £528 | £644 |
£200,000 | £848 | £1,055 | £1,289 |
£300,000 | £1,272 | £1,583 | £1,933 |
£400,000 | £1,696 | £2,110 | £2,578 |
This table is based on monthly repayments on a 25-year mortgage term.
Should I remortgage now or wait?
With the current unpredictable state of world affairs, it’s not surprising people are wondering whether to stick or twist on their mortgage.
If your mortgage deal is ending soon, you can usually lock in a rate up to six months before you actually start the new deal. Then, if a better offer comes along in the meantime, you can switch to that one. This can be a good tactic to take if rates are on the rise.
But when rates are rumoured to be falling over the next few months, there's potentially less of a rush to lock in a deal before you need it.
Beware early repayment charges
It’s important to know that fixed-term mortgages usually come with an early repayment charge (ERC), which you’d be forced to pay if you wanted to switch mortgages before your existing mortgage deal ended.
Depending on how far into your deal you are, ERCs can run to thousands of pounds, so could be a significant factor in your decision to switch or not.
It may be worth waiting to remortgage until your existing deal is coming to an end, particularly if the early repayment charge is high. You will also need to factor in any fees and charges payable to secure a new deal.
Can a mortgage offer be withdrawn?
Yes, mortgage providers often reserve the right to withdraw a mortgage offer. Unfortunately, this could be at any time, including between contracts exchanging and completion.
If your potential lender does withdraw their mortgage offer, you’ll need to start the mortgage application process again. This potentially means another round of eligibility and affordability checks, with lenders reviewing your credit history and credit score to determine a new mortgage offer with potentially a different mortgage rate.
Need mortgage advice?
If you’re worried or confused about what’s happening with interest rates and how they affect your mortgage, you might want to speak to a mortgage advisor.
We’ve partnered with London & Country Mortgages Ltd (L&C)** to provide you with fee-free mortgage advice. Get in touch with an adviser here.
Your home may be repossessed if you don't keep up repayments on your mortgage.
Go to L&C MortgagesAbout London & Country Mortgages Ltd (L&C)
**London & Country Mortgages Ltd (L&C) is a multi-award winning mortgage broker with over 20 years’ experience in helping people secure their perfect mortgage. Advice is provided by L&C, which is authorised and regulated by the Financial Conduct Authority (FCA) (143002).
L&C is not part of Compare the Market Limited. Compare the Market receives a % of the commission that our partner London & Country earns. All applications are subject to lending and eligibility criteria.
L&C will not charge you a mortgage broker fee should you decide to proceed with a mortgage.
What types of insurance might I need for a mortgage?
There are no legal requirements for insurance when getting a mortgage, but your lender will likely insist that you have at least buildings insurance, in order to protect their investment. If you’re becoming a joint homeowner, you might want to consider life insurance. With the right life insurance policy, you can protect your joint homeowner, financially, if you died before the mortgage is paid off.
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What our expert says...
"If you're approaching the end of your fixed-rate deal, you're likely to face a bit of a shock as rates are higher now than they were a few years ago. Unless you've almost paid off your entire mortgage or are planning to move soon, remortgaging is likely to be much cheaper than simply moving onto your lender's standard variable rate.
"I'd suggest talking to a fee-free broker and comparing mortgage deals online well before the end of your deal – you can usually lock in a rate as far as six months in advance."