Bank of England Base Rate Cut to 4% – What It Means for You

By Howard Peterman, August 7, 2025

 

The Bank of England base rate has been cut from 4.25% to 4% - its lowest level in over two years. The decision was passed by a truly narrow 5-4 vote by the Bank’s Monetary Policy Committee.

Despite inflation still running at 3.6%, the Bank has chosen to go ahead with a modest rate cut of 25 basis points.

 

What today’s base rate cut means for mortgage holders:

  • Tracker-rate borrowers will see mortgage payments drop almost immediately, by around £29 per month based on the average mortgage. Discount and Variable Rate borrowers are quite likely to see some downward movement in the coming weeks.
  • Fixed-rate mortgages remain unaffected until the fixed term expires, at which point long-term base rate forecasts may influence new deals.
  • Lenders had already priced in this cut, so don’t expect a big shift in fixed-rate deals necessarily – but overall, borrowers should feel encouraged by today’s news.

 

Will renters be affected by the rate cut?

  • Rents are unlikely to fall directly in response. While some landlords might benefit from cheaper borrowing, rent prices are primarily driven by local supply and demand, not base rate changes.

 

Will savings rates be adjusted?

  • Easy access savings accounts could drop slightly in response.
  • Fixed-rate savings won’t be affected if you've already locked in a rate.

 

Will the base rate fall further?

  • Some forecasters expect no further cuts this year, but many experts had been predicting this one and at least one more to come in 2025. Some (like Deutsche Bank) predict the base rate could fall to 3.25% by early 2026.
  • Inflation is forecast to peak at 4% in September, then gradually ease — but still won’t hit the 2% target until at least 2027.

 

The message, from my point of view, is to view today’s news with a sense of generally cautious optimism – but that being said, don’t expect a sudden drop in mortgage rates, or rents.

As ever, if you would like any further advice on how today’s news affects you and your property, your mortgage choices or your potential move to a new home, I am only too happy to help. Give me a call, any time you like.

 

The Association of Residential Letting Agents TDS The Property Ombudsman THE GUILD OF PROPERTY PROFESSIONALS NAEA/PROPERTYMARK

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