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Boost for borrowers and the Pound as Bank of England cuts base rate to 4%

ended 07. August 2025

FINANCIAL experts say the Bank of England's (BoE) interest rate cut is a huge boost to borrowers and, perhaps surprisingly, the Pound.

The BoE's Monetary Policy Committee has today voted by a majority of 5–4 to reduce the rate by 0.25 percentage points, to 4%, rather than maintaining it at 4.25%.

The cost of borrowing is now at its lowest level for more than two years and Pound Sterling is trading around 0.5% higher across the board today. 

But the BoE did upgrade its estimate of inflation peaking at 4%, from 3.75%.

Shaun Sturgess, Director at Swansea-based Sturgess Mortgage Solutions, said mortgage holders will be relieved by the news.

He said: "The Bank of England’s decision to cut the base rate to 4% is a positive step for mortgage holders and buyers. It signals a shift in sentiment — and while we won’t see a flood of cheaper deals overnight, it does ease pressure on lenders and borrowers alike. 

"Tracker mortgage holders will benefit immediately, and fixed rates could edge down further. For aspiring buyers, this may improve affordability and bring confidence back into the market. 

“Savers, however, may feel the pinch - it’s now more important than ever to review where your money is held."

Ben Thompson, Deputy CEO at Mortgage Advice Bureau, said it will be welcome news for aspiring homeowners.

He said: "The Bank of England's latest rate reduction will provide even more incentive for aspiring homeowners to step onto the property ladder. It was already a good time to buy, but this latest move makes it even more attractive. Lenders are continually adjusting their criteria, and it's increasingly possible to borrow more than you could last year, opening up the mortgage market significantly.

“However, we recognise a major challenge: many potential borrowers simply aren't aware of the full spectrum of mortgage options available to them.

"If homeownership felt out of reach to you before, today's climate offers a significantly stronger chance. With the expert guidance of a mortgage adviser, I strongly encourage aspiring buyers to take full advantage of the market and unlock the financial benefits and long-term security that owning a property offers."

Jack Tutton, Director at Fareham-based SJ Mortgages, said the UK economy is on a knife edge.

He added: “The expected cut to the base rate just about scraped over the line with a vote of 5-4 in favour of a 0.25% cut. Such a close vote shows how much the economy is on a knife edge. The Bank of England has a very difficult job trying to stimulate the economy while balancing the creeping inflation figures. 

"It will be interesting to see how the money markets that fixed rates are priced on react to this and whether lenders can cut their rates further.”

Riz Malik, Director at Southend-on-Sea-based R3 Wealth, said there were signs of further cuts in the future.

He added: "Today's rate cut takes the base rate to a two year low and signals the bank's concern over slowing growth. All eyes now turn to the press conference. 

"Hints of further cuts could push fixed rates down further, offering a lifeline to homeowners remortgaging later this year especially those coming off ultra low deals. What is surprising that not one member voted to cut rates lower than 4% which may suggest further aggressive cuts may not be on the cards."

Prem Raja, Head of Trading Floor at Currencies 4 You, said the Pound has seen a boost.

He said: "The Bank of England has cut interest rates by 0.25% to 4%, with the narrow 5–4 vote suggesting future cuts may not come as quickly as markets previously expected. As a result, Sterling is trading around 0.5% higher across the board today. 

"For mortgage holders and buyers, this move could ease some pressure on borrowing costs; but don’t expect dramatic drops just yet. For savers, returns may start to dip if rate cuts continue, so now may be a good time to review fixed-term options. 

"For investors and FX markets, the less aggressive tone from the BoE is being seen as supportive for the Pound, especially as the ECB and Fed are also showing caution on future cuts. Overall, this marks a shift, but not a pivot, and signals a careful path forward rather than a race to the bottom."

11 responses from the Newspage community

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Riz MalikVerified
Independent Financial Adviser at R3 Wealth
Today's rate cut takes the base rate to a two year low and signals the Bank's concern over slowing growth. All eyes now turn to the press conference. Hints of further cuts could push fixed rates down further, offering a lifeline to homeowners remortgaging later this year especially those coming off ultra low deals. What is surprising that not one member voted to cut rates lower than 4% which may suggest futher aggressive cuts may not be on the cards.
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Samuel Mather-HolgateVerified
Managing Director & IFA at Mather and Murray Financial
A 5-4 vote in favour is good news today, but bad news tomorrow. This most likely means that rate cuts will be slower and now only one more quarter point cut is expected in 2025. This means higher mortgage payments for longer than expected for the country, and we can set the blame at the door of inflation. Global uncertainty caused by Trump tariffs has increased prices across the globe, and its bad news for the UK despite the much lauded trade deal.
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Shaun SturgessVerified
Director at Sturgess Mortgage Solutions
The Bank of England’s decision to cut the base rate to 4% is a positive step for mortgage holders and buyers. It signals a shift in sentiment — and while we won’t see a flood of cheaper deals overnight, it does ease pressure on lenders and borrowers alike. Tracker mortgage holders will benefit immediately, and fixed rates could edge down further. For aspiring buyers, this may improve affordability and bring confidence back into the market. Savers, however, may feel the pinch — it’s now more important than ever to review where your money is held. For markets and investors, the cut may lift sentiment slightly, but could soften the Pound if the UK is seen to be easing faster than others. Overall, this is a welcome signal — but further cuts and economic data will determine how much momentum this creates across the property sector.
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Tony RedondoVerified
Founder at Cosmos Currency Exchange
The rate cut to 4% is a calculated move to support a faltering economy, but its timing is contentious given above-target inflation and market volatility. It offers modest relief to mortgage holders and aspiring buyers, but at the cost of savers and potential currency weakness. The Bank must navigate a delicate balance, and further cuts (potentially to 3.5% by year-end) will depend on inflation and growth data. Savers should act swiftly to lock in rates, while investors should brace for volatility and diversify. The decision’s success hinges on whether inflation stabilizes and global trade tensions ease, both of which remain uncertain.
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Jack TuttonVerified
Director at SJ Mortgages
The expected cut to the Base Rate just about scraped over the line with a vote of 5-4 in favour of a 0.25% cut. Such a close vote shows how much the economy is on a knife edge, the Bank has a very difficult job trying to stimulate the economy while balancing the creeping inflation figures. It will be interesting to see how the money markets that fixed rates are priced on react to this and whether lenders can cut their rates further.
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Rob MansfieldVerified
Independent Financial Advisor at Rootes Wealth Management
The narrow vote suggests it's a difficult balancing act between trying to stimulate the economy and combatting inflation. It's good news for borrowers coming to the end of a 5 year fixed rate term as it may help soften the rise in payments. It is less good news for savers, who may see their returns reduced. Savers may wish to try and lock in fixed rate deals before they go or consider investing the cash.
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Justin MoyVerified
Managing Director at EHF Mortgages
The decision to cut was closer than many predicted, but this 0.25% reduction may be the last we see in 2025. With the balancing of interest rates, high inflation and the gloomy economic outlook, it’s hard to know when future cuts may be back on the agenda, but with mortgage rates already factoring in this cut, don’t expect much more from lenders.
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Harry GoodliffeVerified
Director at HTG Mortgages
The Bank has moved, and not a moment too soon. A cut to 4% won’t change everything overnight, but it’s a big step in the right direction. It gives confidence to buyers and also a boost the market needs to shake off the summer slowdown. Savers won’t be thrilled, but this was always on the cards. We’ve been sitting at peak rates for a while, and today’s move shows the tide is continuing to turning.
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Ranald MitchellVerified
Director at bad credit mortgage specialists Charwin Mortgages
About time. The Bank of England’s decision to cut rates to 4% is a lifeline for mortgage holders and businesses battling high costs. Homeowners rolling off fixed deals now face a slightly softer landing, and would-be buyers may finally see some light at the end of the affordability tunnel if lenders continue to play ball. For savers, this isn't great news, but the bigger issue right now is inflation. After a brief dip, prices are creeping back up with CPI rising to 3.6% in June. The Bank can’t afford to take its eye off the ball. A weaker Pound might be the trade-off, but promoting growth is essential if we’re serious about closing the UK’s fiscal black hole. One cut is welcome but the fight against inflation is far from over.
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Prem RajaVerified
Head of Trading Floor at Currencies 4 You
The Bank of England has cut interest rates by 0.25% to 4%, with the narrow 5–4 vote suggesting future cuts may not come as quickly as markets previously expected. As a result, Sterling is trading around 0.5% higher across the board today. For mortgage holders and buyers, this move could ease some pressure on borrowing costs; but don’t expect dramatic drops just yet. For savers, returns may start to dip if rate cuts continue, so now may be a good time to review fixed-term options. For investors and FX markets, the less aggressive tone from the BoE is being seen as supportive for the Pound, especially as the ECB and Fed are also showing caution on future cuts. Overall, this marks a shift, but not a pivot,and signals a careful path forward rather than a race to the bottom.
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Rachel Geddes0
Strategic Lender Relationship Director at Mortgage Advice Bureau
The Bank of England's latest rate reduction will provide even more incentive for aspiring homeowners to step onto the property ladder. It was already a good time to buy, but this latest move makes it even more attractive. Lenders are continually adjusting their criteria, and it's increasingly possible to borrow more than you could last year, opening up the mortgage market significantly.

“However, we recognise a major challenge: many potential borrowers simply aren't aware of the full spectrum of mortgage options available to them. Our research reveals that 27% of renters believe they'll never be able to afford their first home – a figure we’re determined to change.

"If homeownership felt out of reach to you before, today's climate offers a significantly stronger chance. With the expert guidance of a mortgage adviser, I strongly encourage aspiring buyers to take full advantage of the market and unlock the financial benefits and long-term security that owning a property offers.