The Bank of England has cut the base rate after holding it at 4.25% in June
We’ve taken a look at the thinking behind this latest decision, and whether we’re likely to see any more cuts in 2025.
Some articles on the site contain affiliate links, which provide a small commission to help fund our work. However, they won’t affect the price you pay or our editorial independence. Read more here.
What is the Bank of England base rate?
The interest rate set by the Bank of England (BoE) is known as the base rate.
The current rate was decided on 7 August 2025, cut to 4%, after being held at 4.25% in June. This is the lowest rate since February 2023.
Five members of the Monetary Policy Committee (MPC) voted to reduce the base rate, with one of these members requesting it be cut by 0.5 percentage points to 3.75%. The other four voted for a 0.25 percentage point reduction, which was the ultimate decision. The remaining four members wanted to keep it at 4.25%.
source: tradingeconomics.com
| Date of announcement | Rate | Change |
| August 2025 | 4% | -0.25 percentage points |
| June 2025 | 4.25% | No change |
| May 2025 | 4.25% | -0.25 percentage points |
| March 2025 | 4.5% | No change |
| February 2025 | 4.5% | -0.25 percentage points |
| December 2024 | 4.75% | No change |
| November 2024 | 4.75% | -0.25 percentage points |
| September 2024 | 5% | No change |
| August 2024 | 5% | -0.25 percentage points |
| September 2023 to June 2024 | 5.25% | No change |
| August 2023 | 5.25% | +0.25 percentage points |
| June 2023 | 5% | +0.5 percentage points |
| May 2023 | 4.5% | +0.25 percentage points |
| March 2023 | 4.25% | +0.25 percentage points |
| February 2023 | 4% | +0.5 percentage points |
| December 2022 | 3.5% | +0.5 percentage points |
| November 2022 | 3% | +0.75 percentage points |
| September 2022 | 2.25% | +0.5 percentage points |
| August 2022 | 1.75% | +0.5 percentage points |
| June 2022 | 1.25% | +0.25 percentage points |
| May 2022 | 1% | +0.25 percentage points |
| March 2022 | 0.75% | +0.25 percentage points |
| February 2022 | 0.5% | +0.25 percentage points |
| December 2021 | 0.25% | +0.15 percentage points |
| March 2020 | 0.1% | -0.15 percentage points |
Will interest rates continue to fall in 2025?
We’ve already had three cuts to the base rate this year and experts were previously predicting further cuts taking interest rates down to 3.75% (and one of the MPC members actually suggested it) by the end of 2025.
The market still seems to be suggesting there could be another cut later this year although the Bank of England is continuing with its cautious approach.
Andrew Bailey, governor of the Bank of England, said the decision to cut interest rates was “finely balanced”. He said that interest rates are still on “a downward path” with any future rate cuts needing to be made “gradually and carefully”.
But anything could happen. While global uncertainty seems to have reduced since the last MPC meeting with the US reaching some trade agreements with other countries, we’ve still got the upcoming Autumn Budget, which could have a massive impact on the economy.
There’s been lots of speculation regarding potential tax hikes and/or spending cuts that could be announced, which could see households squeezed resulting in a knock-on effect on economic growth and could impact further rate decisions.
When is the next interest rate decision?
The rate is set every six weeks or so by the Bank of England Monetary Policy Committee, a group of nine people, with the majority vote deciding whether the rate goes up, down or stays the same.
The next meetings will be on:
- 18 September 2025
- 6 November 2025
- 18 December 2025
The base rate and inflation
The driver for changing the base rate right now is inflation, which has been higher than wanted since late 2021.
Increasing interest rates is seen as the key (perhaps only) way to battle inflation, the idea being we’ll save more or have more expensive debts (like mortgages), leading to us spending less. This will force suppliers to lower prices, which in turn will see the inflation rate drop (though in most cases that doesn’t mean prices fall, they just get more expensive at a slower rate).
However, those rate hikes take time to filter down and for the inflation rate to – in theory – come under control. And if you keep increasing rates the danger is it pushes the economy into recession and cause hardship for borrowers, particularly those with mortgages.
Likewise if the Bank decides to cut the rate too early, it might not have done enough, leading to a reverse later on.
How the base rate impacts your money
The BoE rate is a large part of what high street and online banks and lenders use to inform the rates they offer. This means it will impact the cost of borrowing on things like mortgages, loans and credit cards, but also how much you can earn on savings.
Sometimes it’s a direct correlation if you have a product with a tracker rate – something that literally changes up or down in line with the BoE rate. In that case you’ll see an instant change.
On other products you might not see an instant change – if at all. So it pays to shop around to see if you can get a better deal.
Get the best of our money saving content every Monday & Thursday, straight to your inbox
Plus an exclusive £20 welcome bonus for new Quidco members (Terms apply)
How the decision impacts your savings
Since a peak in autumn 2023, rates have generally been falling as banks price in both actual and predicted cuts (they’re fast to pass these on, but slow to give us the increases).
And with the base rate being cut this time, we can expect a flurry of falling savings rates over the next few days – which means lower returns for savers.
If you’ve got a variable savings account the rate could drop very soon, and if you’re looking for a new account, you should try and lock in a fixed rate ASAP before providers make rate changes.
And if we’re expecting another cut later on in the year, as the markets suggest, this trend of falling rates could well continue – so do act sooner rather than later.
However, be mindful of tax on savings interest, too. Reports this week revealed that 120,000 more people are expected to pay tax on their savings interest than previously expected, taking the number to 2.6 million.
Recent research by investment firm AJ Bell suggests that basic-rate taxpayers would only need £19,600 in savings before they hit their tax-free limit. For a higher-rate taxpayer that sum halves to just £9,800 before they will face tax on their savings.
Remember, any returns paid on ISAs will be tax-free and prizes won from Premium Bonds are tax-free too.
The highest-paying savings accounts – our picks
- 6% AER current account from Santander (limited to £4,000 deposit and has monthly fee)
- 7.1% AER regular saver from Zopa
- 4.67% AER easy access Cash ISA from Trading 212
Read more about these and the other best savings accounts in our best buys guide
How the decision impacts your mortgage
If you’ve got a mortgage that tracks the base rate, you should see it fall by 0.25 percentage points.
If you’re on your lender’s standard variable rate (SVR), you may also see some changes.
In fact, those with an average standard variable rate mortgage could save £40 a month on their repayments, based on a loan of £250,000 over 25 years, according to data firm Moneyfacts. And for someone with £125,000 of mortgage borrowing, the 0.25 percentage point cut means a £17 a month saving.
But in the long-term, the impact of base rate changes isn’t as clear-cut. That’s because while some mortgages rates are directly based on the base rate, they’re actually influenced by something known as swap rates – effectively where they think the rate will be in the future.
So if you’ve got a fixed mortgage deal, you’ll find that many lenders price in cuts and rises to the base rate based on previous predictions, so changes are made well in advance of any Bank of England decisions.
But will rates fall in coming months? Well, the markets have signalled we could see another cut this year, so lenders will be working out whether to factor those in too.
However, don’t expect them to fall where they were just a few years ago.
It’s always worth speaking with a mortgage broker who can advise on different strategies – though since no one knows what will happen this still won’t guarantee any savings.
And for anyone who is really struggling to make their repayments, it’s important to talk to your lender to see if anything can be worked out – though bear in mind missing payments can impact your credit report.
If it’s impacting other essential spending, then see whether those companies can support reduced repayments. And if debts have built up, speak to a debt charity.
Compare mortgage rates and deals
Looking for a mortgage? Find the top rates from over 200,000 deals and 100+ lenders with our live tables.
How it impacts other borrowing
With the base rate being cut, so could interest rates on other borrowing, although it’s not guaranteed.
However, it’s not an excuse to rack up new debts.
Things are still uncertain economically and with the Autumn Budget just around the corner (with potential tax rises coming our way) it’s much wiser to try and avoid any big borrowing and try and boost your savings – just in case.
Regardless of the interest rate cut, if you are in need of new credit (and you have a plan to pay it back) make sure you always try and go for 0% deals if you can get them, or to use your savings to pay for things or clear debts rather than take out new ones.
Important
*Your home may be repossessed if you do not keep up repayments on your mortgage. Be Clever With Your Cash may receive a payment from Tembo Money if you complete a mortgage through the link provided. This will not affect the amount you pay for the service.
This broker fee discount of up to £499 is applicable for standard mortgages and remortgages only, more complex cases including guarantor, buy-to-let, adverse credit, and equity transfer may be liable for a fee. The fee you are required to pay will be clearly outlined by your adviser prior to an application being submitted on your behalf. The offer does not cover any other potential fees that may arise during the mortgage process.
Tembo Money Limited (12631312) is a company registered in England and Wales with its registered office at 18 Crucifix Lane, London, SE1 3JW. Tembo is authorised and regulated by the Financial Conduct Authority under the registration number 952652. Tembo Money was awarded Best Mortgage Broker at the British bank awards in 2022, 2023, 2024 and 2025. Rates are not guaranteed and may change by the time you come to apply. Eligibility criteria may vary by lender.
Our calculator is only an estimate of how much you are able to borrow and does not constitute mortgage advice
If you have money given to you and its put you over the maximum threse hold
Both my house/contents insurance and dental plan have increased above the rate of inflation. With proposed increases in council tax, it may still be a few months before interest rates reduce.
Shawbrook bank have just notified me that the current variable rate on its instant access account of 4.99% will be reduced to 4.89% in March so it seems they are anticipating a base rate reduction then. Time to fix perhaps?
If you have a child, consider some of the children easy access savings accounts for a higher savings rate. These include Kent Reliance (3.01% up to £25k), Bath Building Society (2.5% up to £5k), Penrith (2.45% up to £10k), Leeds Building Society (2.25% up to £1m). I’ve placed cash in all of those, beats having it all stuck in Chase or Virgin Money!