Bank of England Cuts Base Rate to 4.25% – What It Means for You

In a move widely anticipated by financial markets, the Bank of England has today (8 May 2025) reduced the base interest rate from 4.50% to 4.25%. This marks the fifth consecutive cut since rates peaked at 5.25% in August 2024, as inflationary pressures continue to ease and economic growth remains modest.

So, what does this mean for mortgages, savers, and your financial plans?

Mortgage Rates – Already on the Move

While today’s announcement is welcome news for borrowers, mortgage lenders had already been factoring in future rate cuts when pricing fixed-rate deals. This is because fixed-rate mortgages are based on something called swap rates – essentially the market’s view of where interest rates are headed. Over the past month, swap rates have fallen by around 0.5%, and we've already seen fixed mortgage deals become more competitive.

At PBS Mortgage & Financial Advisers, we monitor swap rates closely, so we can guide our clients on the right timing to lock in competitive mortgage deals. Whether you're looking to buy, remortgage, or simply review your current arrangements, we’re here to help.

Tracker vs Fixed: What Happens to Your Payments?

Tracker Mortgages:
If you're on a tracker mortgage, which directly follows the Bank of England base rate, you'll benefit from a lower interest rate – and in most cases, this reduction will show in your monthly payment from next month. This can offer immediate financial relief and improve monthly cashflow.

Fixed-Rate Mortgages:
If you're on a fixed-rate deal, your monthly payments won’t change. Fixed-rate mortgages are locked in for a set period, regardless of what happens to the base rate. However, if your current deal is coming to an end soon, now could be a great time to review your options and potentially secure a more competitive rate.

Where Are Rates Headed Next?

Many economists and financial commentators believe that the Bank of England base rate could fall below 4.00% by the end of 2025, depending on how inflation and the broader economy perform.

That said, much of this expectation is already priced into current fixed rates, so waiting too long in the hope of significantly cheaper deals might not pay off. Acting early could help you secure a better rate while options remain strong.

Not Such Good News for Savers

While falling interest rates are a positive for borrowers, it’s less encouraging for savers. As the base rate drops, banks and building societies are likely to reduce the interest they offer on savings accounts. This means the return on your cash savings may fall in the months ahead.

If you’re concerned about your savings, we can help you explore alternative strategies, whether that’s investing, using tax-efficient wrappers like ISAs, or just making sure you’re getting the best return available on your cash.

Let's Talk About Your Financial Future

Whether you’re planning to move house, remortgage, or simply want a financial health check, we’re here to help with clear, honest advice.

📞 Call us today on 01524 888877
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We help clients across Lancaster, Morecambe, the North West, and throughout the UK with mortgage, protection, and financial advice that’s personal, professional, and fully tailored.

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