The Bank of England has cut the base rate to 4%. We look at how this will impact interest rates, mortgages and home-movers.
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The Bank of England has cut the base rate from 4.25% to 4%, its lowest level in over 2 years.
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The decision is likely to improve mortgage affordability, paving the way for more people to move home this year.
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The base rate, also known as the ‘bank rate’ or the ‘interest rate’, influences the rates that mortgage lenders charge their borrowers.
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Today’s decision comes after UK inflation has risen again to 3.6% in June.
It’s now been announced that the Bank of England has cut the base rate by 0.25%, bringing it down to 4% – its lowest level in over two years.
The base rate, also known as the ‘bank rate’ or the ‘interest rate’ is important because it influences the rates that lenders charge their borrowers for things like mortgages.
Why has the base rate been cut?
The Bank has been using the base rate as a way of taming inflation. The Office for National Statistics reports that UK year‑on‑year CPI inflation stood at 3.6 % in June 2025, up from 3.4% in May. This remains well above the Bank of England’s 2% target.
The Bank’s Monetary Policy Committee had a dramatic 5-4 vote, with 4 voting against the cut.
This is the lowest cut from the Bank of England since March 2023.
Breakdown by month:
March 2025: 2.6 % April 2025: 3.5 % May 2025: 3.4 % June 2025: 3.6 %
That April spike was pinpointed to sharply rising water, energy, and transport costs – contributing to that 3.5%.
How does this impact interest rate predictions for 2025?
With today’s cut bringing the base rate down to 4%, many analysts expect we’ll see at least one more cut before the end of the year, possibly in November, which could take the rate to 3.75%.
With inflation ticking up slightly, the Bank of England is still signalling a cautious approach, aiming to support the economy without letting inflation take off again.
What does the latest base rate cut mean for your mortgage?
So what does this all actually mean if you’re thinking about buying, moving, or remortgaging?
While today’s cut in the base rate is welcome news for businesses and consumers, it’s unlikely to make a major difference to the cost of mortgages for home buyers or deliver a boost to house prices. The price of fixed rate mortgages already factors in the future path of base rates meaning average mortgage rates are likely to remain broadly where they are today.
However, changes to the way banks assess mortgage affordability over recent months have already delivered a 20% boost to what people can borrow with no change in average mortgage rates. This has been supporting unseasonably strong levels of housing market activity with the most homes for sale in over seven years. This cut to the base rate will support more positive housing market sentiment amongst home buyers.
Lenders are offering very competitive mortgage deals so it’s important home buyers talk to a mortgage broker to understand what they can afford and what this latest cut means for their home buying decisions.
If you’re on a tracker mortgage, the impact will be almost immediate, as your interest rate moves in line with the base rate. So you could see your payments drop soon.
And if your current fixed-rate deal is ending, now’s a good time to check what new deals are out there. With more lenders competing for business, you might find a better rate than expected.
If you’re looking to get an insight of your monthly mortgage repayments and look at the value of your home we have you covered with.
How could this impact the housing market more broadly?
Reports show clear signs of renewed market activity. Activity in the market is increasing. Buyer demand is up 11% compared to this time last year, sales agreed are up by 8%, showing more people are making a move.
There’s also a record number of homes on the market right now, which means more choice if you’re looking to buy. And while prices are still going up 1.3% year-on-year the market remains steady, with no big jumps.
All in all, it’s a more balanced for both buyers and sellers.
With today’s Bank Rate cut from 4.25% to 4%, there is renewed potential to boost buyer confidence and improve mortgage affordability. While inflation remains elevated at 3.6%, the Bank of England’s shift towards monetary easing signals growing support for the housing market. This could help unlock more transactions in the coming months, particularly among first-time buyers and movers who have been sitting on the sidelines.
