The Bank of England has just cut the Base Rate by 0.25%, bringing it down to 4.25%. This is the second cut we've seen this year, after a similar reduction in February. The move comes as part of the Bank’s ongoing efforts to manage inflation, which currently sits at 2.6% (still above its 2% target) and support overall economic growth.
How will this affect mortgage rates?
Mortgage rates have been slowly coming down in recent weeks. The average 2-year fixed mortgage rate is now 4.64%, while the average 5-year fixed rate sits slightly lower at 4.60%. These reductions, while small, reflect growing confidence that the Base Rate will continue to fall over time.
If you're on a fixed-rate mortgage, your monthly payments won’t change until your current deal ends. But if you’re on a tracker or variable-rate mortgage that follows the Base Rate, you’ll likely see a drop in your monthly payments soon.
What if you’re remortgaging or moving?
If you’re nearing the end of your fixed-rate mortgage or planning to move, now is a good time to start shopping around. You can use a Mortgage Calculator or apply for a Mortgage in Principle to get an idea of what you might be able to borrow.
The Mortgage Charter, launched in 2023, allows borrowers to lock in new deals up to six months before their current one ends. This flexibility can help you avoid falling onto your lender’s Standard Variable Rate (SVR), which is currently around 7.5% and much higher than most fixed rates.
What about affordability?
When lenders assess whether you can afford a mortgage, they run “stress tests” based on higher interest rates, usually the lender’s SVR plus 1%. If the Base Rate cut leads to lower SVRs, these stress test figures could come down too, potentially making it easier for some people to qualify for a mortgage.
What happens next?
The Bank of England reviews interest rates every six weeks. While rates are now on a slow downward trend, it’s unlikely we’ll see a return to the ultra-low levels of 2021. Still, markets are predicting two to three more rate cuts this year, which could ease borrowing costs even further.
The next decision on interest rates is due on 19 June 2025. Until then, we’ll be watching how lenders respond and whether mortgage rates continue their gradual fall.
