Base Rate Cut to 4 %: What Could It Mean for Mortgage Borrowers?

2025-08-12

Industry News

What Just Happened?

On 7 August 2025, the Bank of England’s Monetary Policy Committee (MPC) voted, by a narrow 5-4 majority after two rounds, to reduce the Base Rate by 0.25 percentage points to 4 % the lowest since March 2023. This is the fifth cut in a year, reflecting concerns over slowing economic growth, a softening jobs market, and muted consumer confidence.

Inflation remains elevated at around 3.6 %, above the target of 2 %, but the Bank is signalling a gradual easing to support the economy while still keeping inflation in check.

What It Means for Mortgages in the UK

1. Tracker Mortgage Holders Benefit Immediately

If you’re on a tracker mortgage, your interest rate is directly linked to the Base Rate, meaning your monthly repayments could fall by around £29 on average. Approximately 590,000 tracker mortgage borrowers will see the difference straight away.

2. Standard Variable Rate (SVR) Customers

If your lender adjusts their SVR, you could also see a reduction—although this depends on your lender’s pricing policy and isn’t guaranteed.

3. Fixed-Rate Mortgage Holders

About 85 % of UK mortgage borrowers are on fixed rates. If you’re one of them, your repayments won’t change until your deal ends. However, this Base Rate cut could influence the rates available when you come to remortgage.

4. New Mortgage Deals Are Becoming More Competitive

Some lenders have already trimmed their rates, with competitive two- and five-year fixed deals now dipping below 5 %, and some for well-qualified borrowers falling under 3.8 %. If cuts continue, we could see average fixed rates edging closer to the 4 % mark.

5. Looking Ahead: Could More Cuts Follow?

Market analysts anticipate at least one more Base Rate cut in 2025, potentially down to 3.75 %, depending on inflation and economic performance.

Impact on the Housing Market

• Affordability Boost: Lower rates make monthly mortgage costs more manageable for buyers, particularly first-time buyers and movers.
• Market Confidence: More attractive borrowing costs may encourage hesitant buyers back into the market, leading to increased activity in late 2025.
• Price Outlook: Some forecasts suggest UK house prices could rise by around 4 % over the year, supported by easing mortgage rates and resilient demand.
• Supply Challenges: A recent slowdown in residential construction could limit available housing stock, potentially keeping competition high in certain areas.

How Crown Home Buying & Letting Can Help You

At Crown Home Buying & Letting, we specialise in helping buyers and investors navigate the London property market. Our expert team can:

• Find your ideal property—from stylish apartments to prime investment opportunities.
• Provide end-to-end support—from viewing to completion and beyond.

Whether you’re a first-time buyer, upgrading, downsizing, or investing, now could be the right time to explore your options.