The Bank of England has cut the base rate to 4.25%. Here’s what it means for your mortgage.
The Bank of England has voted to reduce the base interest rate from 4.5% to 4.25% in its latest review on 8 May. This move is aimed at stimulating spending and supporting the economy amid ongoing global uncertainty.
The decision wasn’t unanimous. While most members of the Monetary Policy Committee (who make the base rate decisions) backed the modest 0.25% cut, two members argued for a larger reduction, while two preferred no change at all. The backdrop to this reduction is a fragile global economic outlook, with concerns around trade and tariffs. However, the bank’s latest forecasts suggest that while these issues may lead to slightly weaker growth and lower inflation, the UK is unlikely to tip into recession.
So what does this mean for you?
• If you’re on a fixed-rate mortgage, your payments will stay the same until your deal ends.
• If you’re on a tracker rate, your monthly payments will drop automatically in line with the new base rate.
• If you’re on a standard variable rate, your lender may reduce your payments, but it’s at their discretion.
Falling interest rates
The good news doesn’t end there. In recent weeks, mortgage rates have been falling, with many major lenders now offering fixed-rate deals under 4%. A ‘mini price war’ has broken out among lenders, although the best deals still require larger deposits.
Looking ahead, more rate cuts are expected later this year, with Barclays forecasting a base rate as low as 3.5% by early next year. But predictions are tricky, and with a volatile global economy, nothing is guaranteed.
If your mortgage deal ends this year, it’s worth acting now. We can secure the best deal available today and reapply for a lower rate if interest rates fall further, at no extra cost to you when we resubmit your paperwork.
Not sure whether to fix or track? If you value predictability and your budget is tight, a fixed-rate deal offers stability. But if you’re feeling optimistic about further rate cuts and want more flexibility, a tracker might be the right fit. It’s important for you to get bespoke advice from an experienced mortgage adviser so that you can make an informed decision.
As always, we’re here to help you weigh up your options and make the right choice for your circumstances.