Bank of England Base Rate Announcement: 7th August 2025

The Bank of England lowered the base rate today to 4%. But what does that mean for you and your mortgage? We explain all. 

What happened with interest rates today?   

The Bank of England voted today that interest rates will decrease from 4.25% to 4%. The rate has been slowly decreasing since August 2024, so another drop is big news. 

Why did the rate decrease?   

Every 6 weeks, the Bank of England reviews the base rate at their MPC (Monetary Policy Committee) meeting. It moves up and down (or stays the same) to help control inflation in the UK.   

Rates tend to rise as inflation goes up. A lower rate encourages people to spend their cash to help the economy grow. So, a drop in rates suggests inflation has continued to fall – or is at least under control. Current inflation is 3.6% — and the target (set by the government) is 2%. 

What does it mean for the property market?   

We don’t know for sure. The reasoning usually goes that higher interest rates are passed onto borrowers through higher mortgage rates. This can mean fewer people are looking to buy houses, meaning the price of homes could drop.  

More market activity could lead to house price growth. Could now be your time to buy and sell? Today’s lowering of the rate is encouraging, as mortgages will likely become slightly more affordable. As always, it’s best to talk to a professional before making any big decisions. 

What does the change mean for my mortgage?   

A drop in interest rates generally translates into more affordable mortgages. The average 2-year rate (at time of writing, August 2025) is 5.04%, which is much cheaper than this time two years ago. At its peak, the average 2-year rate was 6.85%. Phew.  

If you’re coming off a relatively cheap 5-year deal, you may have to shop around for affordable rates, as they tended to start rising in 2021.  

If you have a fixed-rate mortgage, you won't feel the effects until your term ends and you’re moved across to your lender’s standard variable rate (SVR).  

For those waiting for further base rate cuts before remortgaging, it’s worth noting that mortgage rates don’t always lower in tandem with the base rate. At this point, it’s good to talk to a lender or a broker, as the standard variable may be a lot more than what you're on now. 

If you’re on a tracker mortgage or a standard variable rate (SVR), you could see an immediate change, as the monthly cost tends to move in line with the base rate. They usually have a minimum rate though, often set at the amount you were paying at the start of the deal.   

What happens next time?    

There are a few predictions out there, with some saying there will be a further cut towards the end of the year. It’s hard to make an exact prediction, so until we find that crystal ball, we’ll have to wait and see. 

Want the latest property updates or have questions about financing? Feel free to reach out – we’re here if you need us.