Interest rate cut to 4.75%: what does it mean for you?

The Bank of England has cut the base rate this month as expected

We’ve taken a look at the thinking behind this latest decision, and whether we’re likely to see more this year and next.

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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 cut on 7 November 2024 to 4.75%, after being cut from 5.25% on 1 August 2024. This is the lowest rate since June 2023.

source: tradingeconomics.com

The cut in August was the first after seven consecutive pauses, which followed a run of 14 consecutive increase moving from 0.1% in early December 2021, a total change of 5.15% percentage points. It was cut to a record low of 0.1% at the start of the pandemic in 2020.

Date of change	Rate	Change
November 2024	4.75%	-0.25 percentage points
September 2024	5%	No change
August 2024	5%	-0.25 percentage points
June 2024	5.25%	No change
May 2024	5.25%	No change
March 2024	5.25%	No change
February 2024	5.25%	No change
December 2023	5.25%	No change
November 2023	5.25%	No change
September 2023	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

Why the base rate changes

The driver for changing rates 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.

Will interest rates fall again in 2024 and 2025?

The first cut this year was expected in the spring, but didn’t happen, and kept getting pushed further back, eventually happening in August. Another was tipped for September, but there was no change.

This unpredictability isn’t anything new, and it shows how it’s always a guessing game ahead of each BoE meeting (and in between). So always take the following with a pinch of salt. But here’s the current thinking.

With inflation falling to a lower than expected 1.7% in September, this cut in November was always looking like a certainty. And further cuts are still expected. The question is how soon?

For most of the last few months, another drop was strongly forecast for December, meaning we’d end the year on 4.5%. And in early October there were even predictions that the base rate could fall to as low as 2.75% in a year’s time – though that was at the extreme end of forecasts.

Now that’s looking less likely. And in part that’s down to last month’s Budget. Some of the measures announced are thought to be slightly inflationary, with the Bank thinking it could go up by half of a percentage point. Last week the Office of Budget Responsibility agreed and said inflation will average 2.5% next year, 2.6% in 2026, and then 2.1% in 2027 and 2028.

Though those CPI figures aren’t anywhere like what we saw in recent years, it does seem it could slow down future base rate cuts. Bank of England Governor Andrew Bailey said with this decision that future cuts will be “gradual”. The latest analysis suggests three more cuts in the next 12 months, with a rate of 4% at the end of 2025.

There’s uncertainty around that, as there is with what the election of Trump in America and the continuing war in the Middle East, so as ever, everything can change and none of this is guaranteed!

When is the next interest rate decision?

The rate is set every six weeks or so by the Bank of England Monetary Committee, a group of nine people, with the majority vote deciding whether the rate goes up, down or stays the same. The November 2024 decision was eight in favour of a 0.25% cut to 4.75%, and one who wanted it to stay at 5%.

The next meetings will be on:

• 19 December 2024
• 6 February 2025
• 20 March 2025
• 8 May 2025
• 19 June 2025
• 7 August 2025
• 18 September 2025
• 6 November 2025
• 18 December 2025

(full dates here).

Why it matters

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.

How it impacts your savings

The increases in the base rate were good news for savers. We’ve been earning very poor levels of interest, but that started to change in late 2021, and got better and better.

But that’s been changing since rates peaked in the autumn of 2023. Since then rates have generally been falling as banks price in the predicted cuts (they’re fast to pass these on, but slow to give us the increases).

Many popular easy access savings accounts are now tracker rates, guaranteeing what you get will fall in the coming days, or even straight away, but the same 0.25 percentage points as the base rate. And since others are variable, they’ll also probably reduce their offering.

Of course, if the next rate cuts do happen at a slower pace, it’ll hopefully mean that fixed rates stay where they are for a little longer. There might even be a little wiggle room at the top for some fixes to go up if the providers had already priced in faster and deeper cuts to the base rate. But overall trend of falling rates is going to continue.

You can find the best paying options in our daily updated best buy tables.

How the base rate impacts your mortgage

The change in the base rate this month will initially sound like welcome news for homeowners in the expectation lenders will reduce their mortgage rates – and that’s certainly true for those on tracker rates and most likely variable deals too.

But if you’re already on a fixed-rate mortgage (which most people are) nothing will change – for the time being.

Many longer term fixes will have priced in changes to the base rate on previous predictions, but if we’re expecting further cuts to take more time to come through, it could mean there’s not much movement downwards on new fixes for now.

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 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.

How it impacts other borrowing

With this change to the base rate, you’re still unlikely to see much difference to the rates of your existing loans or new deals.

Regardless, makes 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.