Bank of England Cuts Base Rate to 4%

Catherine Alexander
Partner at GDA

Yesterday, August 7th 2025, the Bank of England reduced its base rate to 4%, the lowest level in over two years. This decision, made by a narrow vote among policymakers, reflects growing concerns about the UK’s economic slowdown, including rising unemployment and weaker wage growth. While inflation remains above target at 3.6%, the Bank is prioritising support for households and businesses facing higher costs and reduced spending power. For mortgage holders, this could mean lower interest rates on variable-rate products and potentially more competitive fixed-rate deals. However, the outlook remains uncertain, and further rate cuts may be limited. The Monetary Policy Committee (MPC) vote was tight, a reflection of just how uncertain the path forward has become.

Savings rates may not fall as sharply as in previous cycles, since banks and building societies continue to compete for customer deposits. With the Bank adopting a "gradual and careful" approach, and geopolitical risks as well as upcoming UK tax policy decisions looming large, future moves will remain data-driven and cautious.

The next update from the MPC is due on September 18th 2025.

This article is for general information and does not constitute personal financial advice. If you’re unsure what’s best for you, seek independent financial advice.

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