The Bank of England has cut the base rate by 0.25% to 4.00%, in a move welcomed by brokers and borrowers alike.
The decision, announced at midday today, comes after weeks of speculation about when the Monetary Policy Committee (MPC) would ease rates amid signs of slowing inflation and a softening labour market.
While inflation remains above the Bank’s 2% target, it has fallen consistently over recent months.
Coupled with weaker-than-expected economic growth and increasing slack in the jobs market, expectations had been building for the MPC to take action.
Markets had largely priced in a cut going into today’s meeting.
This is the first change to the base rate since June, when the MPC voted to hold at 4.25%, and the fifth cut since the peak of 5.25% in August last year.
Reaction:
Nicholas Mendes, mortgage technical manager and head of marketing at John Charcol:
“This was the widely expected move – and it keeps the Bank of England on that ‘gradual and careful’ path they’ve been talking about for a while. The labour market is softening, businesses are pulling back on hiring, and the economy shrank in April and May. All signs point to a cooling economy but not one that’s falling off a cliff.
“A quarter-point cut won’t move the mortgage market dramatically, but it does keep the downward momentum going. Lenders are likely to trim rates further to stay competitive, especially with some already pricing in another cut before the end of the year.
“The Bank’s decision may give lenders more confidence to adjust pricing, but how far they go will depend on how stable the data looks from here.
“With unemployment now at a four-year high and business confidence slipping, the pressure to support growth is clearly building.
“Today’s move fits the broader narrative of a slow unwind, with expectations already forming around a second cut before the end of the year.”
Adrian Hall, director of surveying at HouzeCheck:
“Despite persistent inflation, it was almost certain the interest rate would be cut – the only uncertainty was the magnitude of the reduction. Given the number of job vacancies continues to decrease and is now below pre-pandemic levels, and with unemployment rising to 4.7%, the highest level since June 2021, it was widely anticipated the bank rate would decrease to at least four per cent. There is no longer concern regarding wage growth.
“This development is highly favourable. Falling mortgage rates benefit not only first-time buyers but also millions of households planning to remortgage in the coming years.
“The current question facing the Bank of England is the direction of future policy. Is this the final rate cut of 2025? Alternatively, could the Morgan Stanley team be correct in predicting that interest rates will decline to as low as 2.75% in the first half of the upcoming new year, ultimately reaching 2%?”
Charles Resnick, chief finance officer at Afin Bank:
“The markets have been predicting a base rate cut since the last announcement back in June, so today’s 0.25% drop to 4% is no surprise.
“But the MPC’s minutes and voting breakdown will be more illuminating as they will show how much of a split there is in the committee and give a hint at the future direction of base rate travel.
“At 3.6%, inflation is still way above the Bank of England’s 2% target, while signs of economic growth are thin on the ground. The country, and the markets, are holding their breath to see what Chancellor Rachel Reeves announces in her Autumn Budget later in the year and whether this would likely lead to further base rate cuts towards the end of the year and into 2026.
“For now, the lower interest rate brings relief to borrowers on tracker rate mortgages and may even spur on more first-time buyers, which would help stimulate the mortgage market. For savers it’s probably a good opportunity to review longer fixed term savings accounts that give them a guaranteed return on their money in 12 to 24 months’ time when the prevailing base rate could be significantly lower.”
George Holmes, director of Aurora Capital:
“The Bank’s direction of travel is right and a cut will be welcomed, but in reality, the pace is painfully slow. Another quarter-point cut won’t make any meaningful difference for small businesses already under pressure from weak demand, rising wage bills and cautious lenders.
“After a year of economic stagnation and a cooling in the labour market, the MPC needs to be bold and go beyond this cautious quarter-point drop each quarter approach.
“A 0.50% cut would give small firms some tangible breathing space, but instead, we’re left with another symbolic move that won’t deliver the change the economy needs.
“It’s obvious they’re worried about runaway inflation, but this caution risks the slow suffocation of the UK’s small businesses. They need cheaper credit, stronger consumer confidence and a reason to invest. This slow and steady approach now could end up costing more in the long run.”
Sarah Pennells, consumer finance specialist at Royal London:
“The Bank of England has cut the base rate to its lowest level since March 2023, which will be good news for borrowers who have a tracker or variable rate mortgage.
“A lower base rate can reduce borrowing costs for those on a variable or tracker rate mortgage, but it also means savers may see lower returns on their savings. Our latest Financial Resilience report shows that the average amount people have in savings is £15,864, rising to £24,122 for those over 60, and a 0.25% fall in savings rates could mean £5 less a month in interest for that population.
“This may not seem significant but almost one in five adults (18%), or 15% of over-60s, are overdrawn at the end of the month or have no money left, so it could have an impact on budgets.
“Any reduction in mortgage payments will be welcome as more than half of mortgage borrowers have seen their monthly housing costs rise over the 12 months to March, by an average of £327. Single-adult households and renters are particularly vulnerable, with 71% of renters seeing their housing costs rise by an average of £233 a month in the same period.
“Falling interest rates can discourage people from saving, but building up an emergency fund is crucial to improve financial resilience. Our research shows that one in five people have less than £100 in savings, which means they are exposed to future rises in costs or unexpected bills.
“That’s why it is important to seek financial advice or guidance, and ensure you’re making informed decisions that protect your financial wellbeing, whatever the interest rate environment.”
Ben Thompson, deputy CEO at Mortgage Advice Bureau:
“The Bank of England’s latest rate reduction will provide even more incentive for aspiring homeowners to step onto the property ladder. It was already a good time to buy, but this latest move makes it even more attractive. Lenders are continually adjusting their criteria, and it’s increasingly possible to borrow more than you could last year, opening up the mortgage market significantly.
“However, we recognise a major challenge: many potential borrowers simply aren’t aware of the full spectrum of mortgage options available to them. Our research reveals that 27% of renters believe they’ll never be able to afford their first home – a figure we’re determined to change.
“While we’ll have to wait and see if another rate cut is on the horizon before the year ends, the message is clear: if homeownership felt out of reach to you before, today’s climate offers a significantly stronger chance. With the expert guidance of a mortgage adviser, I strongly encourage aspiring buyers to take full advantage of the market and unlock the considerable financial benefits and long-term security that homeownership offers.”
Charles Roe, director of mortgages at UK Finance:
“Today’s rate cut by the Bank of England takes us back to where we were just over two years ago when rates were last at 4%.
“While most mortgage holders are on fixed-rate deals, the cut will be welcomed by those on tracker or variable rate mortgages. This rate reduction should also help new mortgage applicants, as affordability and overall borrowing costs could improve.”
Ryan McGrath, director of second charge mortgages at Pepper Money:
“Interest rates have fallen to their lowest level in over two years, providing immediate relief for customers on tracker products who will see reduced monthly payments. This improved rate environment makes second charge mortgages increasingly attractive, particularly for homeowners locked into favourable primary mortgage rates who need additional funding without disrupting their existing arrangements.
“While today’s modest rate cut signals measured caution rather than a fundamental shift, it creates opportunities for those whose circumstances fall outside traditional lending criteria.
“With property transactions remaining subdued and economic pressures mounting, including falling payroll numbers and rising unemployment, secured loans offer a vital lifeline, allowing homeowners to unlock equity to for necessary home improvements or to consolidate high-interest debt into a single, manageable payment at typically lower rates.”
John Phillips, CEO of Just Mortgages and Spicerhaart:
“It’s great to see the central bank putting the economy ahead of inflation when making today’s decision. While inflation has risen and is nearly double target, it importantly remains well within the bank’s broader forecast, which has long predicted a peak in Q3 before beginning to come back down. With a hold last month, the bank doesn’t have to stray too far from its gradual approach and critically gives the UK economy the adrenaline shot it so desperately needs.
“There’s no doubt that many lenders will have already factored this into their pricing, but it remains a powerful piece of good news for brokers to be sharing with potential clients. Lenders have been staying competitive, all while continuing to innovate and seize opportunities to increase access and improve affordability.
“While we’ve certainly seen some bold rate predictions for the rest of the year and beyond – with some predictions of three more cuts – I’m hopeful this isn’t the last one we’ll see this year as inflation hopefully turns a corner and the central bank prioritises the health of the economy.”
Nathan Emerson, CEO of Propertymark:
“Throughout the world, many central banks have faced considerable pressure to reduce interest rates, and the UK has been no exception. So, this news is extremely positive and remains consistent with what has been widely hoped for.
“While this news will be very welcome for many buyers and sellers who may be empowered to potentially borrow more to finance their next house move, inflation is still above the Bank of England’s target rate of 2%.”
Adam Ruddle, chief investment officer at LV=:
“The Bank of England’s decision to reduce rates to 4% seemed increasingly likely as falling employment rates signalled economic weakness.
“Despite headline inflation persisting at 3.6% and services inflation projected to remain above 3% well into next year, this announcement aligns with the Bank’s strategy to gradually decrease the rate.
“This reduction marks the third cut this year and will once again be welcome news to homeowners and prospective buyers, as lower interest rates may lead to lower mortgage rates. According to LV’s Wealth and Wellbeing research, more than a third (36%) of mortgage holders are worried about the future. This reduction may alleviate some of these concerns, especially for people looking to remortgage at a lower rate.
“This further decrease in interest rates will be a helpful boost for the broader economy, helping to stimulate economic activity as the cost of financing falls and consumers and businesses have more capital to invest.
“We expect the Bank will now pause before continuing to lower interest rates later this year.”
Colin Bell, founder and COO of Perenna:
“This cut means one thing for certain – the housing market will continue to heat up, fuelled by the narrative that rate cuts would solve all the affordability woes for those looking to get on the ladder.
“While it is indeed music to the ears of existing owners wanting to sell and upgrade their home, or older generations cashing out and downsizing for their retirements, for first time buyers, it’s more like a screeching violin solo they’re being told they should enjoy.
“It is time to take off our rose-tinted glasses and be honest with our young people. The big blocker on housing affordability is the overall price, not the monthly payments. Many young people are already paying a small fortune in rent.
“We should stop acting like rate drops are a silver bullet solution to their housing woes. In fact, this rate cut will have done very little for first time buyers who simply can’t get over the house price hurdle, let alone secure a low-rate mortgage.”
Daron Kularatnam, group treasurer at Glenhawk:
“This 0.25% rate cut was widely flagged, and is overdue, given growing concerns around the economic outlook and a cooling labour market.
“The BoE’s more cautious stance of late has been driven by stubbornly high core inflation, despite indications of downward pressure across several relevant measures.
“For UK real estate investors and developers, it will require signs that the BoE is committed to a series of cuts before sentiment improves markedly.”
Nick Leeming, chairman of Jackson-Stops:
“The Bank of England’s ‘gradual and careful’ approach remains firmly in place, even against a shifting economic backdrop. While widely expected, today’s cut underscores the need to strengthen confidence amid signs of a softening labour market.
“For mortgaged homeowners wanting to make their next move this decision offers timely relief, and lower borrowing costs should help to unlock activity across the market.
“Regional disparities continue to shape market performance. Across the Jackson-Stops network in the mid-high end of the market, towns like Bury St Edmunds, Chichester and Colchester are seeing renewed buyer interest and modest price growth. Meanwhile, high completion levels in Colchester, Hale, Northampton, and Sevenoaks reflect sustained demand in lifestyle-led, commuter-friendly locations.
“These pockets of resilience highlight the realities of a market, driven by needs rather than nice to haves. As affordability improves and sentiment stabilises, we expect these regional strengths to continue driving market performance through the second half of the year.”
Nick Hale, CEO of Movera:
“The Bank of England’s decision to cut interest rates for the third time this year by 25 basis points is a welcome boost for the mortgage market, with some lenders already reducing their rates ahead of time. Crucially, this continues to offer relief for borrowers and should lead to an increase in buyer momentum and demand for remortgages.
“With further interest rate cuts expected to follow – enabling transactions to increase further – it is crucial that the sector works quickly to streamline the homebuying and remortgaging process to ensure these transactions are dealt with quickly and efficiently.
“Our aim is to support the industry through this process, providing digital products and solutions that can make this a reality.”
Richard Pike, chief marketing and sales officer at Phoebus:
“Today’s decision by the Bank of England to cut the base rate is no surprise, given the growing economic pressures facing the UK. Although inflation remains stubbornly high, the MPC is clearly prioritising economic support in the face of slowing growth, rising unemployment and falling consumer confidence.
“Rachel Reeves will, no doubt, have been praying for this cut as it will go some way to relieving the increased pressure she faces about potential tax rises looming at her autumn budget. And it will also provide some relief to mortgage holders, particularly those on variable rates or coming to the end of fixed-term deals as households face higher living costs and tax pressures.
“For the housing market, this decision adds a layer of cautious optimism. While interest rate cuts don’t fix the structural issues around housing supply and affordability, lower borrowing costs do have the potential to unlock activity, especially among first-time buyers.
“That said, persistent inflation, uncertainty over the government’s fiscal plans, and the global backdrop mean that lenders must remain agile. At Phoebus, we continue to support our clients with systems that help them adapt quickly to market and rate changes, enhance operational efficiency, and deliver for borrowers in a challenging and complex environment.”
Guy Anker, money expert at Compare the Market:
“Today’s decision by the Bank of England to cut interest rates could provide some welcome relief for many homeowners and prospective buyers.
“With mortgage rates having risen sharply over the past two years, today’s move could help ease some of the pressure on borrowers – especially those on variable-rate or tracker deals, and those coming to the end of a fixed term or tracker deal, who are looking into future repayment options.
“However, lenders may pass on rate cuts at different speeds, and not all mortgage products will become cheaper overnight, making it crucial for consumers to compare deals carefully. Whether you’re remortgaging, buying your first home, or just looking to reduce monthly payments, shopping around online could help you find which competitive rates are available to you.”
Tony Hall, head of business development at Saffron for Intermediaries:
“Today’s decision to cut the base rate was to be expected after policymakers signalled the move despite a recent spike in inflation. Lenders have already adjusted, and we’re now seeing a rise in competitive mortgage products, including several below 4%, though global market pressures mean some variation remains.
“The timing is significant, following the Government’s Plan for Change, the most substantial regulatory shake-up in a decade. Announced in July by Chancellor Rachel Reeves, the reforms aim to boost homeownership by cutting financial red tape, potentially unlocking up to 36,000 extra mortgages for first-time buyers and increasing borrowing limits to over 4.5 times salary.
“Together with the rate cut, these changes could bring more buyers into the market and inject fresh momentum as we head into autumn.”
Andrew Gething, managing director of MorganAsh:
“The Chancellor has been clear that she is looking to drive economic growth – something that is arguably hard to do when interest rates sit so high. With the economy stagnating and facing stiff headwinds, a cut to the base rate is much needed to help alleviate this and encourage some positive activity. It’s a move that borrowers will welcome as will those households which feel burdened by significant financial pressures.
“Of course, much of this is based on the expectation that inflationary pressures will subside as the central bank predicts. However, if there’s one thing that inflation continues to demonstrate, it is the difficulty to confidently predict its future path – especially with trade policy proving so uncertain and clear challenges on our own shores. For financial services firms, there will still be a need to stay close to their clients – particularly those in difficulty or with characteristics of vulnerability.
“The challenge remains that many firms still cannot identify who these customers are and therefore cannot provide adequate support or facilitate positive outcomes. Firms absolutely need to equip themselves with the tools and technology to properly respond to the growing need within their own customer base, regardless of the path of inflation or interest rates.”
Steve Cox, chief commercial officer at buy-to-let lender, Fleet Mortgages:
“Today’s decision by the Bank of England to cut Bank Base Rate to 4% is both welcome and necessary, given the current economic backdrop. With GDP falling in both May and June, there has been a growing expectation that the MPC would have to act, even with inflation rising in June and being above the 2% target at 3.6%.
“In a sense it shows the Bank has sensed there is a trade-off here and has come down on the side of trying to improve economic growth. Many analysts had warned of the risks of holding rates too high for too long, and this cut helps to ensure monetary policy does not compound those pressures while also delivering a clear boost for borrowers and the housing market.
“For the buy-to-let sector, this decision will filter through to swap rates, creating an even more competitive pricing environment for advisers and their landlord clients. At Fleet, we’ve already made a series of rate cuts across our buy-to-let range in recent weeks and will continue to review opportunities to do so where market conditions allow.
“With affordability improving and landlord confidence growing, today’s cut adds further momentum and should encourage advisers to proactively engage landlord clients on refinancing and investment opportunities.”
Kevin Roberts, managing director of L&G’s Mortgage Services:
“The Bank of England’s decision to cut the base rate is a welcome boost for borrowers. The mortgage market is in good health – lenders are competing strongly and introducing innovative products following affordability rule changes to support first-time buyers, who now account for 60% of all mortgage broker searches with L&G.
“For those looking to buy, or remortgage, now is a great time to consult with an independent mortgage adviser to take advantage of the current market conditions.”
Jo Carrasco, business partnerships director at Stonebridge:
“Today’s rate cut sends a clear signal that the Monetary Policy Committee believes the greater risk now lies in a faltering economy rather than entrenched inflation.
“While inflation remains nearly double the Bank of England’s target, the balance has shifted. Wage growth is easing, the labour market is softening, and GDP data shows the economy retracted in May. Meanwhile, the Bank appears increasingly confident that inflation will roll back next year, creating room to begin loosening policy.
“Unless the economic outlook improves significantly, we expect at least one further cut before the end of the year, providing relief for borrowers on variable-rate mortgages.
“It could also accelerate the downward trend in fixed mortgage pricing. Sub-4% deals are already widespread, supported by falling swap rates and intense competition among lenders.
“Stonebridge’s latest Mortgage Market Briefing, which offers a snapshot of activity in the mortgage market, showed that the average borrower is already £890 better off than they were a year ago, thanks to falling rates. If today’s cut reduces funding costs further, borrowers should see further savings in the weeks ahead.
“For advisers, staying close to their customers and proactively demonstrating the value of their professional advice must continue to be their priority.”
