Bank of England cuts interest rates from 4.5% to 4.25%

The Bank of England has cut interest rates from 4.5% to 4.25% today.

Andrew Bailey, the Bank's governor, said that easing inflation was the main motivation behind the decision to cut interest rates. However, he warned that the "past few weeks have shown how unpredictable the global economy can be" following the introduction of worldwide tariffs by US President Trump.

The Bank of England’s rate-setting committee was divided - five members voted to cut rates to 4.25%, two voted in favour of a larger 0.5% cut and two voted for no change to interest rates.

The interest rate cut is the second this year and will have an immediate impact on hundreds of thousands of mortgages. Homeowners on tracker deals will typically see their monthly repayments fall by aound £29, according to figures from banking trade body UK Finance.

Those homeowners with mortgages on standard variable rates will need to see how their lender reacts.

However, 80% of mortgage-holders have fixed deals which means their interest rate will remain the same and can only change when they renew a deal after the fixed rate expires, which can be anywhere from 2 to 5 years.

Mortgage lenders have been cutting mortgage interest rates on new deals in the last few weeks, leading to a mini price war. That’s due to the markets and, in turn, lenders anticipating interest base rate cuts and “pricing in” those changes to their current deals.

So, even though the Bank of England has cuts interest rates by 0.25% today, there’s no guarantee fixed mortgage rates will go down even further.

The Monetary Policy Committee consists of nine members—five women and four men—including economists and key figures from the Bank.

Meeting eight times annually, the committee's decisions significantly impact mortgage rates, business investments, and overall economic activity. Its main goal is to use interest rates to keep inflation at the government's target of 2%.

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