August 7th, 2025
At its latest meeting, the Bank of England has announced a 0.25% cut to the base rate, reducing it from 4.25% to 4.00%.
This is the second cut to the Base Interest Rate in 2025, signalling a cautious shift towards easing borrowing costs following a period of higher interest rates aimed at controlling inflation.
If you’re a homeowner, first-time buyer or considering a remortgage, this change may influence your next steps. Here’s what you need to know.
Why has the base rate been cut?
The Bank of England uses the base rate to help control inflation. While inflation remains above the Bank’s 2% target – sitting at 3.4% in June 2025 – some signs point to a broader economic slowdown. This has increased pressure to reduce borrowing costs to support growth.
Economists predicted a modest rate cut, and the Bank has now delivered. However, officials have made it clear that further cuts will depend on how the economy and inflation evolve.
How does this affect your mortgage?
If you have a fixed-rate mortgage
There won’t be any immediate change to your monthly payments. However, if your fixed term is coming to an end soon, this base rate cut may influence the types of remortgage deals available. Some lenders may begin to adjust their rates, and it’s worth reviewing your options now.
Find out more about remortgaging
If you have a tracker or variable rate mortgage
A tracker mortgage follows the base rate directly, so you may see your interest rate and monthly payment fall soon. Variable rate mortgages, which are set by individual lenders, may also change, though not always immediately.
If you’re looking to buy a home
Lower interest rates can sometimes lead to more competitive mortgage deals, depending on how lenders respond. If you’re a contractor or self-employed professional, it’s especially important to work with a broker who understands your income structure and can help you access the right deal (that’s us!).
What happens next?
While today’s decision offers some relief, it’s not a guarantee that rates will continue to fall. The Bank has stressed the importance of responding to future economic data, particularly inflation and employment trends.
Some financial commentators, including those quoted in The Telegraph, have suggested that more cuts could come in 2026 to support the wider economy – but the pace and timing of any further changes remain uncertain.
Need support with your mortgage?
CMME helps contractors find mortgage solutions tailored to their unique financial situation.
Whether you’re coming to the end of your current deal, looking to buy, or want to review your options, our expert advisors are here to help.