What the Latest Interest Rate Cut Means for You
Bank Rate Drops to 4% — What Happened?
On 7 August 2025, the Bank of England’s Monetary Policy Committee voted by a slim 5–4 majority to reduce the Bank Rate from 4.25% to 4%, marking the fifth cut in just over a year. It’s the lowest level since March 2023.
The vote was particularly tight. One member initially pushed for a larger cut but settled on 0.25% after a second round of voting; the first time such a procedure was needed in the Committee’s history.
Why This Matters for You
Borrowers (Especially with Variable-Rate Mortgages)
If you’re on a tracker or variable-rate mortgage, your payments should soon fall, great news as borrowing becomes cheaper. Even if you’re on a fixed rate, newer deals are reacting to the base rate, so now could be a smart time to remortgage or compare offers.
Savers
This is where the picture gets trickier. Many banks have already cut savings rates—some by more than 0.5%—in response to the Bank Rate drop. At the same time, inflation rose to 3.8% in July, and is projected to peak at 4.0% in September. That means your savings may now be losing real value.
Inflation & Economic Outlook
Despite the rate cut, inflation remains high—driven by rising food and transport costs—and the BoE expects it to breach 4% in September before easing.
While most economists anticipate one more cut later this year (likely November) and possibly another in early 2026, optimism is cautious given inflation’s persistence.
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