Bank of England Base Rate Announcement: 8th May 2025

The Bank of England met today to evaluate interest rates – and they’ve decided to cut the base rate. 

The decision to lower the base rate is a sign that borrowing costs could decrease and is likely a result of Donald Trump’s latest round of tariffs. But what does this mean for your mortgage? 

What happened with interest rates today?   

The Bank of England voted today that interest rates will decrease from 4.5% to 4.25%. This follows the drop from 4.75% to 4.5% in February. The rate has slowly decreased since August 2024, so another drop is big news. A cut was expected, however, as Trump’s trade war hit the global economy, and naturally, things had to shift to prevent an economic slowdown. 

Why did the rate decrease?   

Every few 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. For reference, inflation is currently sitting at 2.6%, but it’s expected to hit 3.7% this summer due to rising costs of energy and food.  

What does it mean for the housing 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.  

So, today’s lowering of the rate is encouraging for new buyers, as mortgages will likely become slightly more affordable. This could bring up demand for houses, and maybe prices. But there are a lot of other factors, so we’ll have to see. 

What does the change mean for my mortgage?   

A drop in rates is good news for first-time buyers looking for a mortgage. If you already have a mortgage, and your rate is locked in (often called a ‘fixed’ mortgage), there won’t be any immediate change. Your rate will stay the same until your fixed term ends – whatever the interest rate does.  

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.   

If your rate’s expiring soon, it’s good to talk to a lender or a broker — since the standard variable rate may be a lot more than what you're on now. 

What happens next time?    

It’s hard to say for sure, but people were expecting cuts in 2025, so today’s announcement lines up with that thinking. Some economists say that the cuts should be bigger next time to help protect UK jobs and growth. As for the next interest rate decision? We can’t say what will happen, but we’ll be here to let you know the outcome. 

In the meantime, feel free to reach out – we’re here if you need us.