The benchmark interest rate in the United Kingdom was last recorded at 4.25 percent. This dataset provides - United Kingdom Interest Rate - actual values, historical data, forecast, chart, statistics, economic calendar and news.

Between January 2018 and May 2025, the United Kingdom's consumer price inflation rate showed notable volatility. The rate hit its lowest point at *** percent in August 2020 and peaked at *** percent in October 2022. By September 2024, inflation had moderated to *** percent, but the following months saw inflation increase again. The Bank of England's interest rate policy closely tracked these inflationary trends. Rates remained low at -* percent until April 2020, when they were reduced to *** percent in response to economic challenges. A series of rate increases followed, reaching a peak of **** percent from August 2023 to July 2024. The central bank then initiated rate cuts in August and November 2024, lowering the rate to **** percent, signaling a potential shift in monetary policy. In February 2025, the Bank of England implemented another rate cut, setting the bank rate at *** percent, which was further reduced to **** percent in May 2025. Global context of inflation and interest rates The UK's experience reflects a broader international trend of rising inflation and subsequent central bank responses. From January 2022 to July 2024, advanced and emerging economies alike increased their policy rates to counter inflationary pressures. However, a shift began in late 2024, with many countries, including the UK, starting to lower rates. This change suggests a potential new phase in the global economic cycle and monetary policy approach. Comparison with other major economies The UK's monetary policy decisions align closely with those of other major economies. The United States, for instance, saw its federal funds rate peak at **** percent in August 2023, mirroring the UK's rate trajectory. Similarly, central bank rates in the EU all increased drastically between 2022 and 2024. These synchronized movements reflect the global nature of inflationary pressures and the coordinated efforts of central banks to maintain economic stability. As with the UK, both the U.S. and EU began considering rate cuts in late 2024, signaling a potential shift in the global economic landscape.

Mortgage interest rates in Europe soared in 2022 and remained elevated in the following two years. In many countries, this resulted in interest rates more than doubling. In the UK, the average mortgage interest rate rose from **** percent in 2020 to **** percent in 2023, before falling to **** in 2024. Why did mortgage interest rates increase? Mortgage rates have risen as a result of the European Central Bank (ECB) interest rate increase. The ECB increased its interest rates to tackle inflation. As inflation calms, the ECB is expected to cut rates, which allows mortgage lenders to reduce mortgage interest rates. What is the impact of interest rates on home buying? Lower interest rates make taking out a housing loan more affordable, and thus, encourage homebuying. That can be seen in many countries across Europe: In France, the number of residential properties sold rose in the years leading up to 2021, and fell as interest rates increased. The number of houses sold in the UK followed a similar trend.

Building society revenue is anticipated to grow at a compound annual rate of 27.4% over the five years through 2025-26 to £51.7 billion, including estimated growth of 2.7% in 2025-26. Building societies have benefited from an influx of re-mortgaging activity, as homeowners have sought to lock in lower rates before expected interest rate rises. However, societies faced challenging operating conditions, including intense competition from other financial institutions like retail banks. Following the COVID-19 outbreak, the Bank of England underwent aggressive rate hikes, aiding interest income. Despite the growing base rate environment feeding through to elevated mortgage rates, the residential property market proved resilient for the majority of 2022-23, resulting in building societies reporting huge boosts to their net interest income. In 2023-24, rates continued to rise, lifting revenue growth further despite intensifying mortgage price competition. However, deposit costs picked up during the year, placing downward pressure on net interest income and profitability. Yet, revenue continued to skyrocket thanks to healthy interest income from mortgage lending in the higher base rate environment. In 2024-25, sticky inflation resulted in interest rates staying higher for longer, aiding revenue growth. However, rate cuts did occur as inflation normalised, contributing to a slower rate of revenue growth, which was partially offset by a healthy housing market. In 2025-26, revenue is set to continue growing as mortgage lending gathers momentum, with buyers making the most of lower borrowing costs. However, a declining base rate will continue to erode interest income and further slow revenue in 2025-26. Building society revenue is anticipated to grow at a compound annual rate of 2.5% over the five years through 2029-30 to reach £58.5 billion. The UK housing market will continue to grow thanks to lower borrowing costs and aid interest income in the coming years through healthier mortgage lending. Revenue growth will disperse outside of the capital in regions like the North West, Yorkshire and the West Midlands due to the government's levelling up agenda and private multinationals expanding their presence elsewhere.

Over the five years through 2024-25, UK banks' revenue is expected to climb at a compound annual rate of 1.7% to £128.6 billion, including an anticipated hike of 2% in 2024-25. After the financial crisis in 2007-08, low interest rates limited banks' interest in loans, hitting income. At the same time, a stricter regulatory environment, including increased capital requirements introduced under the Basel III banking reforms and ring-fencing regulations, constricted lending activity. To protect their profitability, banks such as Lloyds have shut the doors of many branches and made substantial job cuts. Following the COVID-19 outbreak, the Bank of England adopted aggressive tightening of monetary policy, hiking interest rates to rein in spiralling inflation. The higher base rate environment lifted borrowing costs, driving interest income for banks, who reported skyrocketing profits in 2023-24. Although profit grew markedly, pressure to pass on higher rates to savers and fierce competition weighed on net interest income at the tail end of the year, the difference between interest paid and interest received. UK banks are set to continue performing well in 2024-25 as the higher interest rate environment maintains healthy interest income, aiding revenue growth. However, net interest income is set to dip marginally due to higher deposit costs and narrow margins on mortgage loans. With further rate cuts priced into markets, savings rates will drop in 2024-25, stemming the drop in net interest income. Over the five years through 2029-30, industry revenue is forecast to swell at a compound annual rate of 3.3% to reach £151.1 billion. Regulatory restrictions, tougher stress tests and stringent lending criteria will also hamper revenue growth. Competition is set to remain fierce – both internally from lenders that deliver their services exclusively via digital channels and externally from alternative finance providers, like peer-to-peer lending platforms. The possibility of legislation like the Edinburgh reforms will drive investment and lending activity in the coming years, if introduced. However, concerns surrounding the repercussions of less stringent capital requirements and the already fragile nature of the UK financial system pose doubt as to whether any significant changes will be made.

Banks employ various strategies to attract and retain their customer base, such as cheap overdrafts, in-credit interest and no withdrawal charges. While the number of new and active customers can be easily observed, customer satisfaction is trickier. Knowing how customers feel about the service received can help banks adjust to the dynamics of an increasingly competitive market. Customer satisfaction for leading banks in the UK According to the Which? customer satisfaction survey, as of November 2024, three digital banks, First Direct, Monzo Bank, and Starling Bank had the highest customer satisfaction score. According to the survey, 83 percent of these banks' customers were satisfied with the banks' services and products, and willing to recommend them to their friends. Investment in selected European countries Among the services that aim at making banking more customer-oriented and effortless is the current account switch service (CASS). CASS allows customers to change their bank account hassle-free, redirecting transactions and transferring payment arrangements. As of the second quarter of 2024, nine out of 20 banks observed increased their customer base following the CASS process. The highest gain-to-loss ratios were recorded by Danske Bank and Santander, gaining respectively 5.29 and 3.27 times more new customers than the ones lost to other banks.

The yield on United Kingdom 10Y Bond Yield rose to 4.68% on July 20, 2025, marking a 0 percentage point increase from the previous session. Over the past month, the yield has edged up by 0.18 points and is 0.51 points higher than a year ago, according to over-the-counter interbank yield quotes for this government bond maturity. UK 10 Year Gilt Bond Yield - values, historical data, forecasts and news - updated on July of 2025.