Bank of England cuts base rate to 4.25% – here's what it means for your mortgage and savings

It's also used by the Bank of England as a tool to control inflation (the rate at which prices rise). The Bank has a target of 2% for the Consumer Prices Index (CPI) measure of inflation, which is set by the Government.

This is the fourth time the Bank has cut the rate since August 2024, when it fell from 5.25% to 5%. The last cut, from 4.75% to 4.5%, was in February 2025.

Martin Lewis: What the cut means for savings, mortgages, loans and more

Reacting to the news on X, MoneySavingExpert.com founder Martin Lewis said:

Why the base rate was cut

The Monetary Policy Committee, which determines the rate, voted by a majority of five to four to cut the base rate by 0.25 percentage points to 4.25%. Two members voted in favour of cutting the rate further, to 4%, while another two members wanted to keep the rate at 4.5%. Explaining the reasons for its decision, the Bank said "there had been substantial progress on disinflation".

The latest figures show that CPI inflation fell to 2.6% in March (from 2.8% in February). Despite this being above the Bank's target, it was still a bigger drop than expected. Combined with "previous external shocks" to the economy receding, it's led to the Bank choosing to cut the base rate to 4.25% – its lowest point in nearly two years.

Myron Jobson, senior personal finance analyst for investment platform Interactive Investor, said: "The Bank of England's decision to trim interest rates was as predictable as the tide, reflecting a cautious approach amid lingering global economic uncertainties, not least the knock-on effects of Donald Trump's ongoing trade war."

When will the base rate fall again?

Experts say more cuts are likely this year as the overall rate of inflation is currently expected to stay close to the Bank's target.

Nicholas Mendes, of mortgage broker John Charcol, said he expects at least one more cut this year, with "a strong possibility" of more. He added: "If inflation continues to ease and the economy shows further signs of weakening, there's a reasonable chance the base rate could fall as low as 3.5%. Markets are already starting to price this in."

Mr Jobson agreed, adding that another cut could come as soon as next month: "Markets anticipate that the Bank will follow this cut with a further three reductions – perhaps as soon as June – potentially bringing its benchmark rate to around the 3.5% mark by the end of the year, as it seeks to strike a delicate balance between growth and inflation pressures."

Russ Mould, investment director at investment platform AJ Bell, highlighted several trends that could lead to lower inflation and allow the Bank to cut rates further later this year: "Lower oil and gas prices will filter through to the UK Energy Price Cap as soon as July and help year-on-year inflation rate comparisons.

"The stronger pound also helps put a bit of a lid on imported inflation... while a fresh round of price competition between the leading supermarkets may also help the headline readings."

I have a mortgage – what does this mean for me?

Here are the key need-to-knows for mortgage borrowers:

• Looking for a new mortgage deal? The cheapest fixes were already steadily falling in the weeks ahead of the base rate announcement, with two-year fixes starting at 3.79%, and five-year fixes from 3.83%.
  
  Our weekly email from before the base rate announcement has step-by-step guidance on finding a cheaper mortgage. And if you're wondering whether to fix now or wait in the hope rates will improve further, see what mortgage brokers had to say about this.

• For those on a fixed mortgage deal, there's no change for now. Regardless of what happens to the base rate, the amount you pay WON'T change during your fixed period. You can usually lock in a new rate three to six months ahead of your current deal ending, which prevents you from rolling on to your lender's costly standard variable rate (SVR) and can act as insurance against interest rates rising before your current deal ends.

• If you're on a tracker mortgage that 'tracks' the base rate, you'll see your rate come down. This means a change to your monthly repayment within days or weeks, depending on when your next repayment is.

• If you're on your lender's SVR, the rate you pay MIGHT also come down. You're usually moved on to your lender's SVR after your fix or tracker deal ends. SVRs can be changed by lenders at a whim, though normally it coincides with changes to the base rate. See our table below for a full lender-by-lender breakdown.
  
  SVRs are typically around 7.5%, far more costly than the cheapest fixed and tracker deals. By sorting a new deal now, you'll likely be able to save money straight away.

Mortgage changes lender-by-lender

I'm a saver – what will happen to rates?

Since the base rate was last cut in February, we've generally seen savings rates drop across the board, and the latest cut means they're set to continue to decrease.

We contacted major savings providers to ask them what they're doing in response to the base rate cut. So far, the following have confirmed cuts for both existing and new customers (where accounts are still available):

• Chase will cut the rate on its standard linked saver from 3% to 2.75% from Thursday 15 May. This means its boosted saver that launched two weeks ago will also drop from 4.8% to 4.55%.

• Co-op Bank will cut the rates on a range of its variable rate savings accounts, including cash ISAs, by up to 0.25 percentage points from 23 July 2025. The rate on its 'Base Rate Tracker' account will decrease by 0.25 percentage points from Thursday 15 May. You can find the full list of changes on Co-op Bank's website (link opens a PDF).

• NatWest, Royal Bank of Scotland and Ulster Bank will cut the rates on seven variable rate savings accounts, including the Help to Buy ISA, by up to 0.67 percentage points from Friday 30 May.

• Santander will cut the rate on its 'Rate for Life' and 'Good for Life' savings accounts by 0.25 percentage points from Tuesday 3 June.

• Tandem will cut the underlying rate on its easy-access account by 0.25 percentage points from Thursday 22 May.

• Zopa will cut the rate on its 'access pots' by 0.25 percentage points from Friday 23 May. Its 'boosted pots' have already dropped by 0.25 percentage points as they are directly linked to the base rate.

Consider fixing your savings to lock in today's rates

The first step is to check your interest. At the very least, you should be getting the top standard easy-access rate. Millions are on pants rates, and it's simple and easy to move your money to where it pays more. And if you're on a fix, diarise to act before it ends.

• Got money to lock away? The benefit of fixed-rate savings is certainty, but in return, your money is locked away without access.
  
  As Martin says in our latest weekly email, it may be a good time to fix your savings – the top fixed rates right now are higher than where the base rate is predicted to go, so fixes may quickly end up paying more than future easy-access rates (if the predictions come true).
  
  GB Bank currently offers 4.5% on a six-month fix, while Conister Bank pays 4.52% for a one-year fix. For lots more options, see Martin's full savings briefing.

• If you need access to your cash, the top 4.83% easy-access cash ISA currently beats the top normal savings. If you haven't already maxed this year's £20,000 allowance, Trading 212 pays 4.83% and allows you to transfer in all the money you have in previous years' cash ISAs. Its savings safety protection comes from Barclays, NatWest, or JPMorgan. See our Cash ISAs guide for full info.
  
  It's worth noting that the Government is considering cutting the £20,000 cash ISA limit later this year. For a full explanation of this, including what you should be doing now, watch Martin's video.

• Used your ISA allowance and have more to save? The top rate for a normal easy-access saver is with app-only provider Sidekick, which pays 4.76% (including a one-year 0.72% one-year bonus) and offers unlimited withdrawals – though you'll need to deposit £5,000-plus to get this rate.

For lots more options, see our Top savings accounts guide.