Interest rates cut from 4.25% to 4%

UK interest rates were cut on Thursday (7th August 2025), lowering the cost of borrowing to its lowest level in over two years.

The Bank of England reduced the base rate from 4.25% to 4%, marking its fifth rate cut since last August and bringing rates to their lowest point since March 2023.

This move offers some relief for mortgage holders, with lower monthly payments for those on certain types of loans. However, it also means diminished returns for savers.

Alongside the rate cut, the Bank of England released its latest economic forecasts, reflecting an economy that showed no growth in April and May. This stagnation could create a significant shortfall in public finances—one that the government might address through tax increases in the upcoming Autumn Budget.

Next week, the Office for National Statistics is set to publish data on the UK’s economic performance for the second quarter of the year. The economy grew by 0.7% in the first quarter.

Following the rate cut, those with an average £250,000 standard variable mortgage over 25 years will see monthly repayments drop by around £40. However, savers will see their returns shrink. The average savings rate, which was 3.9% in August last year, has now fallen to 3.5%.

Although further interest rate reductions are anticipated, they are likely to occur more gradually compared to the pace seen since last year.

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